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

A 20% down payment is usually the standard when purchasing a home. The lender's risk is generally only the remainder between the home value and the sum due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and natural value fluctuations in the event a purchaser defaults.

During the recent mortgage boom of the last decade, it was common to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender in the event a borrower doesn't pay on the loan and the market price of the home is lower than what the borrower still owes on the loan.

Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI can be costly to a borrower. It's beneficial for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender consumes all the damages.

How homebuyers can keep from paying PMI

With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, keen homeowners can get off the hook a little earlier.

Considering it can take countless years to get to the point where the principal is just 20% of the original loan amount, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends predict falling home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home could have secured equity before things simmered down.

An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Nordquist Appraisal LLC, we're experts at pinpointing value trends in Pittsburgh, Allegheny County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will usually 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