Have equity in your home? Want a lower payment? An appraisal from Book Value 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 oftentimes only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and typical value variations in the event a borrower defaults.

The market was taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the value of the home is less than what the borrower still owes on the loan.

Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes 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 doesn't pay, contradictory to a piggyback loan where the lender absorbs all the damages.

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

How can a buyer keep from paying PMI?

The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise home owners can get off the hook beforehand. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.

It can take many years to reach the point where the principal is just 20% of the initial loan amount, so it's important to know how your home has increased in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends forecast falling home values, understand 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.

A certified, 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 keep up with the market dynamics of our area. At Book Value Appraisals, we know when property values have risen or declined. We're experts at analyzing value trends in Peoria, Peoria County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually cancel the PMI with little effort. At which 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