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

It's typically known that a 20% down payment is common when purchasing a home. The lender's risk is generally only the difference between the home value and the amount outstanding on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and regular value changes in the event a purchaser is unable to pay.

During the recent mortgage boom of the mid 2000s, it was common to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the worth of the property is lower than the balance of the loan.

PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible. It's lucrative for the lender because they secure the money, and they get the money if the borrower doesn't pay, opposite from a piggyback loan where the lender takes in all the costs.

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

How can a homebuyer refrain from bearing the cost of PMI?

The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, acute homeowners can get off the hook a little earlier.

It can take many years to get to the point where the principal is only 20% of the initial loan amount, so it's important to know how your home has appreciated in value. After all, any appreciation you've obtained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home could have gained equity before things settled down, so even when nationwide trends signify falling home values, you should realize that real estate is local.

An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Area Appraisal Services, Inc., we know when property values have risen or declined. We're experts at identifying value trends in Bethesda, Montgomery County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At that time, the home owner can relish 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

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