Have equity in your home? Want a lower payment? An appraisal from C.D. McCullough Real Estate Appraisal can help you get rid of your PMI.

A 20% down payment is usually the standard when getting a mortgage. The lender's risk is oftentimes only the difference between the home value and the sum outstanding on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and regular value variations in the event a borrower defaults.

During the recent mortgage upturn of the mid 2000s, it was customary to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary plan covers the lender in case a borrower defaults on the loan and the worth of the house is lower than what is owed on the loan.

Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. It's beneficial for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, different from a piggyback loan where the lender takes in all the costs.

How home buyers can keep from bearing the cost of PMI

With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, keen home owners 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 amount borrowed, so it's essential to know how your home has grown in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends forecast declining home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home could have secured equity before things calmed 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 difficult thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At C.D. McCullough Real Estate Appraisal, we know when property values have risen or declined. We're masters at recognizing value trends in Colton, San Bernardino County and surrounding areas. When faced with data from an appraiser, the mortgage company will often eliminate the PMI with little anxiety. At which time, the homeowner can relish 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