Have equity in your home? Want a lower payment? An appraisal from R.M. Conrad & Associates, Inc. can help you get rid of your PMI.

A 20% down payment is usually the standard when buying a house. Because the risk for the lender is usually only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and regular value changeson the chance that a borrower defaults.

During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender handle the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan protects the lender in case a borrower defaults on the loan and the market price of the home is less than the balance of the loan.

Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible, PMI is pricey to a borrower. It's lucrative for the lender because they acquire the money, and they get paid if the borrower doesn't pay, different from a piggyback loan where the lender takes in all the deficits.

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

How can buyers avoid bearing the expense 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 reaches 78 percent of the initial loan amount. Keen home owners can get off the hook sooner than expected. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.

It can take countless years to reach the point where the principal is just 20% of the original loan amount, so it's important to know how your home has grown in value. After all, any appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home could have acquired equity before things cooled off, so even when nationwide trends predict declining home values, you should understand that real estate is local.

An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At R.M. Conrad & Associates, Inc., we're masters at identifying value trends in West Chester, Chester County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will 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