Have equity in your home? Want a lower payment? An appraisal from REVARI (Real Estate Valuation and Research Inc.) can help you get rid of your PMI.

A 20% down payment is usually the standard when purchasing a home. The lender's risk is oftentimes only the difference between the home value and the sum due on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and regular value variations on the chance that a purchaser doesn't pay.

Banks were working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the worth of the house is lower than what the borrower still owes on the loan.

PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the deficits, PMI is lucrative for the lender because they secure the money, and they get paid if the borrower defaults.

How homebuyers can refrain from bearing the cost of PMI

With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook a little early.

It can take many years to get to the point where the principal is just 20% of the initial loan amount, so it's essential to know how your home has increased in value. After all, any appreciation you've obtained over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends forecast decreasing home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have acquired equity before things cooled off.

A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to know 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 masters at recognizing value trends in Claremont, Sullivan County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often remove the PMI with little trouble. At that time, the homeowner 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