Have equity in your home? Want a lower payment? An appraisal from Allen Appraisal Service can help you get rid of your PMI.

A 20% down payment is typically accepted when purchasing a home. The lender's liability is usually only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuations in the event a purchaser doesn't pay.

The market was taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional policy takes care of the lender in the event a borrower doesn't pay on the loan and the market price of the property is less than what the borrower still owes on the loan.

Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. Unlike a piggyback loan where the lender consumes all the losses, PMI is beneficial for the lender because they acquire the money, and they receive payment if the borrower is unable to pay.

How homebuyers can refrain from bearing the expense of PMI

The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Savvy homeowners can get off the hook a little earlier. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.

Since it can take countless years to reach the point where the principal is only 20% of the original amount of the loan, it's important to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home could have secured equity before things calmed down, so even when nationwide trends predict decreasing home values, you should realize that real estate is local.

An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to know the market dynamics of their area. At Allen Appraisal Service, we know when property values have risen or declined. We're masters at pinpointing value trends in Washington, Washington County and surrounding areas. When faced with information from an appraiser, the mortgage company will often remove the PMI with little effort. At which time, the homeowner 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