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

A 20% down payment is usually accepted when purchasing a home. Since the risk for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and natural value changesin the event a purchaser doesn't pay.

Banks were taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to handle the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the market price of the house is lower than what the borrower still owes on the loan.

Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender consumes all the losses, PMI is lucrative for the lender because they acquire the money, and they get the money if the borrower defaults.

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

How home buyers can refrain from paying PMI

The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Smart home owners can get off the hook beforehand. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.

Considering it can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's essential to know how your home has grown in value. After all, every bit of appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home could have secured equity before things settled down, so even when nationwide trends indicate plummeting home values, you should understand that real estate is local.

An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It is an appraiser's job to understand the market dynamics of their area. At James Earp Appraisal Service, we know when property values have risen or declined. We're masters at analyzing value trends in Raleigh, Wake County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often remove 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