Let Karen A. Zirpoli - KAZ Appraisals, LLC help you discover if you can eliminate your PMI

A 20% down payment is usually the standard when purchasing a home. Because the liability for the lender is usually only the difference between the home value and the sum outstanding on the loan, the 20% provides a nice cushion against the costs 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 often 0 percent. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary policy protects the lender in the event a borrower doesn't pay on the loan and the worth of the house is less than what the borrower still owes on the loan.

PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the costs, PMI is beneficial for the lender because they collect the money, and they receive payment if the borrower is unable to pay.

How home owners can prevent paying PMI

With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, acute home owners can get off the hook a little earlier.

It can take countless years to arrive at the point where the principal is just 20% of the original amount borrowed, so it's essential to know how your home has grown in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home could have acquired equity before things settled down, so even when nationwide trends signify falling home values, you should understand that real estate is local.

The difficult thing for almost all homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to keep up with the market dynamics of their 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 data from an appraiser, the mortgage company will usually drop the PMI with little anxiety. At which 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