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

When getting a mortgage, a 20% down payment is typically the standard. The lender's risk is oftentimes only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and natural value fluctuations on the chance that a borrower defaults.

The market was taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the value of the home is lower than what is owed on the loan.

Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible, PMI can be costly to a borrower. It's money-making for the lender because they secure the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs all the costs.

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

How can a homebuyer avoid bearing the cost of PMI?

The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook sooner than expected.

It can take countless years to get to the point where the principal is just 20% of the initial loan amount, so it's important to know how your home has appreciated in value. After all, any appreciation you've obtained over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends predict plunging home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have secured equity before things settled down.

An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Tierney Appraisals, we're experts at analyzing value trends in Beverly, Essex County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little trouble. At that 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