Have equity in your home? Want a lower payment? An appraisal from J. GRAHAM GAULT REAL ESTATE APPRAISER & CONSULTANT can help you get rid of your PMI.

When buying a house, a 20% down payment is usually the standard. Because the risk for the lender is generally only the remainder between the home value and the sum due on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value changeson the chance that a borrower defaults.

The market was accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the market price of the property is lower than the balance of the loan.

Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible, PMI is costly to a borrower. It's advantageous for the lender because they obtain the money, and they get paid if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs all the losses.

How homeowners can keep from paying PMI

With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Acute homeowners can get off the hook a little earlier. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.

Because it can take countless years to reach the point where the principal is only 20% of the initial loan amount, it's crucial to know how your home has grown in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home may have gained equity before things cooled off, so even when nationwide trends signify plunging home values, you should realize that real estate is local.

The hardest thing for almost all homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to recognize the market dynamics of their area. At J. GRAHAM GAULT REAL ESTATE APPRAISER & CONSULTANT, we know when property values have risen or declined. We're experts at recognizing value trends in Monroe, Ouachita County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often drop the PMI with little trouble. At which time, the homeowner can enjoy 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