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

It's generally known that a 20% down payment is accepted when buying a house. Since the liability for the lender is oftentimes only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and typical value variationson the chance that a purchaser is unable to pay.

The market was accepting down payments down to 10, 5 and often 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 guards the lender in case a borrower doesn't pay on the loan and the value of the property 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. Unlike a piggyback loan where the lender takes in all the deficits, PMI is profitable for the lender because they collect the money, and they get the money if the borrower defaults.

How buyers can avoid bearing the expense of PMI

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Acute homeowners can get off the hook ahead of time. The law states that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.

Since it can take countless years to reach the point where the principal is just 20% of the initial amount of the loan, it's necessary to know how your home has grown in value. After all, every bit of appreciation you've gained over time counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends forecast decreasing home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have secured equity before things simmered down.

The difficult thing for many home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to understand the market dynamics of their area. At MGK Properties, we're experts at identifying value trends in Hemet, Riverside County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At that time, the home owner can enjoy 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