Have equity in your home? Want a lower payment? An appraisal from Certified Residential Appraisal, Inc. can help you get rid of your PMI.

A 20% down payment is typically the standard when buying a house. Because the liability for the lender is usually only the difference between the home value and the sum remaining on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and typical value fluctuationson the chance that a purchaser doesn't pay.

During the recent mortgage upturn of the last decade, it was customary to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the market price of the house is less than the loan balance.

Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI can be expensive to a borrower. It's money-making for the lender because they collect the money, and they get paid if the borrower is unable to pay, different from a piggyback loan where the lender takes in all the costs.

How can a home buyer refrain from bearing the expense of PMI?

The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook ahead of time.

It can take many years to reach the point where the principal is just 20% of the original amount borrowed, so it's crucial to know how your home has appreciated in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Even when nationwide trends signify declining home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have gained equity before things simmered down.

The toughest thing for almost all home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to keep up with the market dynamics of their area. At Certified Residential Appraisal, Inc., we're masters at pinpointing value trends in Orland Park, Cook 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 trouble. 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