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

It's typically understood that a 20% down payment is common when buying a house. The lender's liability is generally only the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and typical value variations on the chance that a purchaser defaults.

During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. This added policy takes care of the lender if a borrower is unable to pay on the loan and the market price of the house is less than the loan balance.

PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the costs, PMI is beneficial for the lender because they secure the money, and they receive payment if the borrower is unable to pay.

How can a buyer prevent paying PMI?

The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, acute homeowners can get off the hook ahead of time.

It can take many years to get to the point where the principal is only 20% of the initial loan amount, so it's essential to know how your home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends hint at decreasing home values, you should realize that real estate is local.

The hardest thing for most homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to know the market dynamics of our area. At Lake Conroe Appraisals LLC, we know when property values have risen or declined. We're experts at identifying value trends in Conroe, Montgomery County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often drop the PMI with little effort. At which time, the homeowner can retain 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