Have equity in your home? Want a lower payment? An appraisal from Accurate Valuation LLC can help you get rid of your PMI.

When buying a house, a 20% down payment is usually the standard. The lender's liability is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and regular value fluctuations in the event a purchaser doesn't pay.

During the recent mortgage upturn of the last decade, it was common to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the market price of the home is lower than what is owed on the loan.

PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible. It's beneficial for the lender because they secure 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 losses.

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

How buyers can prevent bearing the cost of PMI

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise home owners can get off the hook ahead of time. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.

Considering it can take many years to get to the point where the principal is just 20% of the initial amount borrowed, it's necessary to know how your home has grown in value. After all, any appreciation you've obtained over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends indicate plummeting home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have acquired equity before things calmed down.

The toughest thing for almost all homeowners 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 know the market dynamics of their area. At Accurate Valuation LLC, we're experts at identifying value trends in Wellington, Larimer County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often drop the PMI with little effort. 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