Have equity in your home? Want a lower payment? An appraisal from O'Neil & Company can help you get rid of your PMI.

A 20% down payment is typically the standard when getting a mortgage. The lender's liability is often only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value fluctuations in the event a purchaser doesn't pay.

During the recent mortgage upturn of the last decade, it became customary to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower defaults on the loan and the worth of the home is lower than the balance of the loan.

PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the losses, PMI is favorable for the lender because they collect the money, and they get paid if the borrower is unable to pay.

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

How buyers can refrain from bearing the cost of PMI

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

It can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, so it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home could have secured equity before things calmed 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 goes over the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At O'Neil & Company Appraisal Service, we're experts at analyzing value trends in Northeastern Colorado, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often do away with the PMI with little effort. At which time, the home owner 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