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

It's largely known that a 20% down payment is common when purchasing a home. The lender's risk is usually only the remainder between the home value and the amount due on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and regular value fluctuations in the event a purchaser defaults.

The market was taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the value of the home is less than the loan balance.

PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible. It's favorable for the lender because they secure the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender consumes all the deficits.

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

How can homebuyers avoid bearing the cost of PMI?

The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law stipulates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, wise home owners can get off the hook a little earlier.

Because it can take countless years to get to the point where the principal is just 20% of the original amount borrowed, it's essential to know how your home has increased in value. After all, any appreciation you've acquired over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be heeding the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends forecast decreasing home values, you should realize that real estate is local.

A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It's an appraiser's job to recognize the market dynamics of their area. At RWA Appraisals, we know when property values have risen or declined. We're masters at pinpointing value trends in Port Orchard, Kitsap County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally cancel the PMI with little anxiety. At that time, the home owner 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