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

A 20% down payment is usually accepted when purchasing a home. Because the liability for the lender is oftentimes only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuationson the chance that a borrower defaults.

Banks were taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This added plan covers the lender if a borrower doesn't pay on the loan and the worth of the house is less than what is owed on the loan.

PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible. Contradictory to a piggyback loan where the lender consumes all the deficits, PMI is profitable for the lender because they collect the money, and they receive payment if the borrower is unable to pay.

How can a home buyer avoid bearing the cost of PMI?

The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen home owners can get off the hook sooner than expected. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.

Since it can take countless years to reach the point where the principal is just 20% of the initial amount of the loan, it's crucial to know how your home has appreciated in value. After all, any appreciation you've achieved over time counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends predict plummeting home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home may have acquired equity before things simmered down.

The hardest thing for almost all homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Gregory James Company, Inc., we know when property values have risen or declined. We're experts at recognizing value trends in Atlanta, Polk County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally cancel the PMI with little effort. At that time, the home owner 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