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

It's generally inferred that a 20% down payment is accepted when buying a house. Because the risk for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and typical value variationsin the event a purchaser is unable to pay.

During the recent mortgage boom of the mid 2000s, it became common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the additional risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental policy protects the lender in case a borrower doesn't pay on the loan and the market price of the home is lower than the balance of the loan.

PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's money-making for the lender because they obtain the money, and they receive payment if the borrower is unable to pay, opposite from a piggyback loan where the lender takes in all the damages.

How can home owners keep from paying PMI?

With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Wise home owners can get off the hook sooner than expected. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.

Because it can take many years to reach the point where the principal is only 20% of the initial amount of the loan, it's important to know how your home has increased in value. After all, any appreciation you've achieved over the years counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be minding the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends signify plunging home values, you should realize that real estate is local.

The hardest thing for many home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At S&R Appraisal Service, we're masters at analyzing value trends in Van Nuys, Los Angeles County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally cancel the PMI with little trouble. At which time, the home owner 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