Have equity in your home? Want a lower payment? An appraisal from Maria Hopkins Associates can help you get rid of your PMI.

It's typically inferred that a 20% down payment is accepted when buying a house. Since the risk for the lender is oftentimes only the difference between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and typical value fluctuationson the chance that a purchaser defaults.

The market was working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower doesn't pay on the loan and the market price of the property is less than what is owed on the loan.

Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. Opposite from a piggyback loan where the lender takes in all the losses, PMI is lucrative for the lender because they collect the money, and they get the money if the borrower defaults.

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

How can homebuyers keep from bearing the expense of PMI?

The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy homeowners can get off the hook ahead of time. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.

It can take many years to reach the point where the principal is only 20% of the initial amount of the loan, so it's essential to know how your home has grown in value. After all, every bit of appreciation you've gained 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 reflecting the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends forecast plunging home values, you should understand 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 tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At Maria Hopkins Associates, we know when property values have risen or declined. We're masters at recognizing value trends in Spencer, Worcester County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often remove the PMI with little trouble. At which 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