Have equity in your home? Want a lower payment? An appraisal from Gateway Appraisals Ltd. can help you get rid of your PMI.

It's generally understood that a 20% down payment is the standard when buying a house. The lender's risk is generally only the difference between the home value and the sum outstanding on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and natural value variations on the chance that a purchaser is unable to pay.

During the recent mortgage upturn of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the worth of the home is lower than the balance of the loan.

Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. It's money-making for the lender because they secure the money, and they get paid if the borrower is unable to pay, contradictory to a piggyback loan where the lender takes in all the losses.

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

How can buyers avoid bearing the cost of PMI?

The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, acute home owners can get off the hook sooner than expected.

It can take many years to reach the point where the principal is only 20% of the original amount borrowed, so it's important to know how your home has grown in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home might have acquired equity before things calmed down, so even when nationwide trends indicate plummeting home values, you should understand that real estate is local.

The difficult thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to keep up with the market dynamics of their area. At Gateway Appraisals Ltd., we're experts at recognizing value trends in Wantagh, Nassau County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often remove the PMI with little anxiety. 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