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

It's generally understood that a 20% down payment is the standard when purchasing a home. The lender's liability is generally only the difference between the home value and the amount due on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and typical value variations in the event a purchaser defaults.

During the recent mortgage boom of the mid 2000s, it was common to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional policy protects the lender if a borrower defaults on the loan and the worth of the home is less than the loan balance.

Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible, PMI can be expensive to a borrower. Contradictory to a piggyback loan where the lender absorbs all the damages, PMI is favorable for the lender because they secure the money, and they receive payment if the borrower doesn't pay.

Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.

How can buyers prevent bearing the expense of PMI?

The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy homeowners can get off the hook beforehand. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.

Considering it can take countless years to reach the point where the principal is only 20% of the original loan amount, it's essential to know how your home has grown in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends hint at plummeting 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. As appraisers, it's our job to understand the market dynamics of our area. At Graham Appraisal, we know when property values have risen or declined. We're masters at recognizing value trends in Glasgow, Barren County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At which 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