Have equity in your home? Want a lower payment? An appraisal from American Appraisal, Inc. can help you get rid of your PMI.

A 20% down payment is usually accepted when buying a house. The lender's liability is oftentimes only the remainder between the home value and the amount due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and regular value variations on the chance that a purchaser is unable to pay.

During the recent mortgage boom of the last decade, it was common to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the value of the property is lower than what is owed on the loan.

PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible. It's profitable for the lender because they acquire the money, and they get the money if the borrower defaults, separate from a piggyback loan where the lender absorbs all the damages.

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

How homebuyers can keep from paying PMI

With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart homeowners can get off the hook a little early. The law states that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.

It can take countless years to reach the point where the principal is just 20% of the original amount borrowed, so it's necessary to know how your home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends indicate plunging home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have secured equity before things simmered down.

The hardest thing for almost all home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to know the market dynamics of their area. At American Appraisal, Inc., we're experts at determining value trends in Bakersfield, Kern County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. 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