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

When purchasing a home, a 20% down payment is typically the standard. Considering the liability for the lender is usually only the remainder between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and natural value variationsin the event a purchaser doesn't pay.

During the recent mortgage upturn of the last decade, it became common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary policy covers the lender if a borrower is unable to pay on the loan and the market price of the home is less than the balance of the loan.

Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. It's favorable for the lender because they secure the money, and they get the money if the borrower is unable to pay, contradictory to a piggyback loan where the lender takes in all the costs.

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

How home buyers can avoid bearing the expense of PMI

The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Keen home owners can get off the hook beforehand. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.

Since it can take many years to arrive at the point where the principal is only 20% of the original amount borrowed, it's necessary to know how your home has increased in value. After all, every bit of appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends indicate falling home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have secured equity before things simmered down.

The toughest 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 recognize the market dynamics of our area. At Edwards Appraisal Service, Inc., we're masters at determining value trends in Goldsboro, Wayne County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually cancel the PMI with little effort. At which time, the homeowner can retain 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