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

When getting a mortgage, a 20% down payment is usually the standard. Because the risk for the lender is usually only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and natural value changesin the event a borrower doesn't pay.

During the recent mortgage upturn of the mid 2000s, it was common to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added policy protects the lender if a borrower defaults on the loan and the worth of the property 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 generally isn't even tax deductible, PMI can be expensive to a borrower. It's money-making for the lender because they collect the money, and they get the money if the borrower is unable to pay, contradictory to a piggyback loan where the lender absorbs 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 home buyers prevent paying PMI?

With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, acute home owners can get off the hook a little early.

It can take countless years to arrive at the point where the principal is just 20% of the original loan amount, so it's necessary to know how your home has grown in value. After all, every bit of appreciation you've acquired over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood might not be minding the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends forecast declining home values, you should understand that real estate is local.

The hardest thing for most home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to understand the market dynamics of their area. At Premier Appraisal of SoCal, we know when property values have risen or declined. We're experts at recognizing value trends in Mission Viejo, Orange County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally cancel 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