Have equity in your home? Want a lower payment? An appraisal from EClark Group Appraisals, Inc. can help you get rid of your PMI.

A 20% down payment is typically the standard when buying a house. Considering the liability for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuationson the chance that a borrower defaults.

Banks were taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the worth of the property is less than the balance of the loan.

Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible, PMI is pricey to a borrower. Opposite from a piggyback loan where the lender absorbs all the costs, PMI is favorable for the lender because they collect the money, and they receive payment if the borrower doesn't pay.

How home buyers can prevent paying PMI

With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Savvy home owners can get off the hook beforehand. The law designates that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.

It can take countless years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's essential to know how your home has appreciated in value. After all, any appreciation you've obtained over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends predict plunging home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home may have gained equity before things simmered down.

The toughest thing for most home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At EClark Group Appraisals, Inc., we're masters at determining value trends in Miamisburg, Montgomery County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will generally drop the PMI with little effort. 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