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 typically accepted when buying a house. Because the risk for the lender is generally only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and natural value fluctuationsin the event a purchaser doesn't pay.

During the recent mortgage upturn of the last decade, it became customary to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the increased risk of the small down payment with Private Mortgage Insurance or PMI. This supplemental plan covers the lender in case a borrower is unable to pay on the loan and the value of the house is lower than the loan balance.

PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible. It's favorable for the lender because they acquire the money, and they get paid if the borrower doesn't pay, different from a piggyback loan where the lender takes in all the costs.

How home owners can keep from bearing the expense of PMI

With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Keen homeowners can get off the hook beforehand. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.

Because it can take many years to reach the point where the principal is only 20% of the initial amount of the loan, it's crucial to know how your home has increased in value. After all, every bit of appreciation you've acquired over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home could have secured equity before things cooled off, so even when nationwide trends signify falling home values, you should understand that real estate is local.

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 recognize 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 analyzing value trends in Claremont, Sullivan County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often do away with the PMI with little trouble. At that time, the home owner can delight in 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