Have equity in your home? Want a lower payment? An appraisal from Karen A. Zirpoli - KAZ Appraisals, LLC can help you get rid of your PMI.

It's widely understood that a 20% down payment is common when purchasing a home. Because the liability for the lender is usually only the difference between the home value and the sum due on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and regular value variationsin the event a borrower doesn't pay.

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. A lender is able to manage the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional plan covers the lender in the event a borrower is unable to pay on the loan and the worth of the home is lower than the loan balance.

Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. Separate from a piggyback loan where the lender absorbs all the deficits, PMI is money-making for the lender because they obtain the money, and they get paid if the borrower defaults.

How can buyers avoid bearing the expense of PMI?

The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook ahead of time.

It can take countless years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's important to know how your home has appreciated in value. After all, all of the appreciation you've gained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends hint at falling home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have secured equity before things settled down.

The toughest 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 know the market dynamics of our area. At Karen A. Zirpoli - KAZ Appraisals, LLC, we're experts at pinpointing value trends in Nokesville, Prince William County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will most often do away with the PMI with little effort. At which time, the home owner can relish 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