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

A 20% down payment is usually the standard when getting a mortgage. The lender's liability is usually only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and natural value variations in the event a purchaser doesn't pay.

The market was taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the market price of the home is lower than what the borrower still owes on the loan.

PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. Different from a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they secure the money, and they get the money if the borrower is unable to pay.

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

How can a homebuyer keep from paying PMI?

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, acute home owners can get off the hook sooner than expected.

Considering it can take countless years to get to the point where the principal is just 20% of the initial amount borrowed, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends forecast plunging home values, understand that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home could have secured equity before things calmed down.

The hardest thing for most home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At Floyd Appraisal Works, we're experts at pinpointing value trends in Hohenwald, Lewis County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will generally do away with the PMI with little trouble. At that time, the home owner 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