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

When getting a mortgage, a 20% down payment is usually the standard. Considering the risk 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 charges of foreclosure, reselling the home, and typical value changesin the event a borrower defaults.

During the recent mortgage upturn of the last decade, it became common to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added plan takes care of the lender in case a borrower doesn't pay on the loan and the value of the property is less than the balance of the loan.

Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be costly to a borrower. It's profitable for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender consumes all the damages.

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

How can buyers refrain from paying 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 equals 78 percent of the original loan amount. Acute home owners can get off the hook sooner than expected. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.

Since it can take many years to arrive at the point where the principal is just 20% of the initial amount of the loan, it's necessary to know how your home has increased in value. After all, any appreciation you've gained over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home may have gained equity before things cooled off, so even when nationwide trends forecast declining home values, you should understand that real estate is local.

The hardest thing for almost all homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to understand the market dynamics of their area. At Lynch Appraisals, we know when property values have risen or declined. We're masters at pinpointing value trends in Estill Springs, Franklin County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often do away with the PMI with little trouble. At which time, the homeowner 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