Have equity in your home? Want a lower payment? An appraisal from Herrin Appraisal Company can help you get rid of your PMI.

It's generally inferred that a 20% down payment is the standard when getting a mortgage. Because the risk for the lender is usually only the difference between the home value and the sum due on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value fluctuationsin the event a purchaser doesn't pay.

Banks were accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the market price of the property is less than what the borrower still owes on the loan.

PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the damages, PMI is beneficial for the lender because they secure the money, and they get the money if the borrower is unable to pay.

How home buyers can keep from bearing the cost of PMI

The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart homeowners can get off the hook ahead of time. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.

Considering it can take many years to get to the point where the principal is only 20% of the initial amount of the loan, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends indicate plummeting home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have secured equity before things simmered down.

The toughest thing for most homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. It is an appraiser's job to know the market dynamics of their area. At Herrin Appraisal Company, we know when property values have risen or declined. We're masters at recognizing value trends in Clemmons, Forsyth County and surrounding areas. Faced with information from an appraiser, the mortgage company will often do away with the PMI with little trouble. At that time, the homeowner can enjoy the savings from that point on.

Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year