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

A 20% down payment is typically accepted when purchasing a home. The lender's risk is usually only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower doesn't pay.

During the recent mortgage boom of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the market price of the house is lower than the balance of the loan.

Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible, PMI is pricey to a borrower. It's beneficial for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, opposite from a piggyback loan where the lender absorbs all the costs.

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

How homeowners can keep from bearing the expense of PMI

The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook ahead of time.

It can take countless years to get to the point where the principal is only 20% of the initial amount borrowed, so it's important to know how your home has increased in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home may have acquired equity before things cooled off, so even when nationwide trends hint at plunging home values, you should realize that real estate is local.

The difficult thing for almost all home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to understand the market dynamics of our area. At Premier Appraisals, Inc., we know when property values have risen or declined. We're masters at identifying value trends in Nesconset, Suffolk County and surrounding areas. When faced with figures from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At that time, the homeowner 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