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

When purchasing a home, a 20% down payment is usually the standard. Considering the liability for the lender is often only the difference between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and typical value fluctuationsin the event a purchaser is unable to pay.

Banks were accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional plan guards the lender in the event a borrower is unable to pay on the loan and the worth of the home is lower than the balance of the loan.

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

How can a homeowner keep from bearing the expense of PMI?

With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, acute homeowners can get off the hook a little earlier.

Considering it can take countless years to arrive at the point where the principal is just 20% of the initial amount of the loan, it's important to know how your home has increased in value. After all, all of the appreciation you've accomplished over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Even when nationwide trends predict plunging home values, understand that real estate is local. Your neighborhood might not be following the national trends and/or your home could have secured equity before things calmed down.

The hardest thing for many homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to recognize the market dynamics of our area. At Shamrock Appraisals, Inc., we're masters at recognizing value trends in Tuscaloosa, Tuscaloosa County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually drop the PMI with little effort. 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