Let Karen A. Zirpoli - KAZ Appraisals, LLC help you figure out if you can get rid of your PMI

It's generally known that a 20% down payment is common when buying a house. Considering the liability for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice buffer against the costs 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 was widespread to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to endure the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower doesn't pay on the loan and the market price of the home is lower than what the borrower still owes on the loan.

Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. Opposite from a piggyback loan where the lender takes in all the costs, PMI is beneficial for the lender because they acquire the money, and they get the money if the borrower doesn't pay.

How can homebuyers prevent bearing the cost of PMI?

The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law guarantees that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, keen home owners can get off the hook sooner than expected.

Because it can take many years to get to the point where the principal is just 20% of the original loan amount, it's crucial to know how your home has grown in value. After all, every bit of appreciation you've accomplished over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be following the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends indicate declining home values, you should realize that real estate is local.

The difficult thing for most home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to recognize the market dynamics of their area. At Karen A. Zirpoli - KAZ Appraisals, LLC, we know when property values have risen or declined. We're experts at analyzing value trends in Nokesville, Prince William County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At that time, the home owner can enjoy 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