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

A 20% down payment is typically the standard when getting a mortgage. The lender's risk is usually only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser is unable to pay.

During the recent mortgage upturn of the last decade, it was common to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to endure the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower doesn't pay on the loan and the value of the home is lower than the balance of the loan.

Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. It's favorable for the lender because they collect the money, and they get paid if the borrower is unable to pay, unlike a piggyback loan where the lender consumes all the damages.

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

How buyers can avoid paying PMI

The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute home owners can get off the hook a little early. The law guarantees that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.

It can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home could have acquired equity before things calmed down, so even when nationwide trends indicate declining home values, you should realize that real estate is local.

An accredited, 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 know the market dynamics of their area. At Tierney Appraisals, we're masters at analyzing value trends in Beverly, Essex County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually cancel the PMI with little effort. At that time, the homeowner 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