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

When purchasing a home, a 20% down payment is typically the standard. Because the risk for the lender is oftentimes only the difference between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and natural value variationson the chance that a purchaser defaults.

The market was taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the market price of the home is lower than the balance of the loan.

PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the damages, PMI is beneficial for the lender because they acquire the money, and they receive payment if the borrower is unable to pay.

How can buyers refrain from paying PMI?

The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise homeowners can get off the hook a little early. The law pledges that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent.

Since it can take many years to arrive at the point where the principal is just 20% of the original amount of the loan, it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home might have secured equity before things settled down, so even when nationwide trends indicate decreasing home values, you should understand that real estate is local.

The difficult thing for many homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to keep up with the market dynamics of our area. At BK Appraisal Services, we're experts at identifying value trends in Virginia Beach, Virginia Beach City County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally remove the PMI with little effort. At that 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