Let REVARI (Real Estate Valuation and Research Inc.) help you discover if you can get rid of your PMI

A 20% down payment is typically accepted when purchasing a home. Since the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and typical value changeson the chance that a purchaser doesn't pay.

Lenders were taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the market price of the house is lower than the balance of the loan.

PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible. It's money-making for the lender because they acquire the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender absorbs all the costs.

How home buyers can prevent paying PMI

The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, wise homeowners can get off the hook a little early.

It can take many years to arrive at the point where the principal is just 20% of the initial amount of the loan, so it's essential to know how your home has increased in value. After all, all of the appreciation you've accomplished over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends signify decreasing home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home could have acquired equity before things simmered down.

An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At REVARI (Real Estate Valuation and Research Inc.), we know when property values have risen or declined. We're experts at identifying value trends in Claremont, Sullivan County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At which time, the home owner can relish 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