Have equity in your home? Want a lower payment? An appraisal from Race Appraisal Services, LLC can help you get rid of your PMI.

It's largely inferred that a 20% down payment is common when buying a house. Since the risk for the lender is oftentimes only the difference between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuationsin the event a borrower doesn't pay.

During the recent mortgage boom of the mid 2000s, it became common to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the worth of the house is lower than what is owed on the loan.

PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. Contradictory to a piggyback loan where the lender absorbs all the losses, PMI is lucrative for the lender because they acquire the money, and they get paid if the borrower is unable to pay.

How can homeowners avoid bearing the cost of PMI?

With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law stipulates that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, acute home owners can get off the hook ahead of time.

It can take countless years to arrive at the point where the principal is only 20% of the initial loan amount, so it's crucial to know how your home has grown in value. After all, all of the appreciation you've obtained over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be minding the national trends and/or your home may have secured equity before things calmed down, so even when nationwide trends forecast decreasing home values, you should realize that real estate is local.

An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Race Appraisal Services, LLC, we know when property values have risen or declined. We're masters at analyzing value trends in East Longmeadow, Hampden County and surrounding areas. When faced with information from an appraiser, the mortgage company will often remove the PMI with little effort. At that time, the home owner can retain 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