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

When buying a house, a 20% down payment is usually the standard. Considering the liability for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and typical value variationsin the event a purchaser defaults.

Banks were accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the value of the property is lower than what is owed on the loan.

PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Contradictory to a piggyback loan where the lender absorbs all the damages, PMI is beneficial for the lender because they acquire the money, and they get the money if the borrower defaults.

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 requires the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise home owners can get off the hook ahead of time. The law designates that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.

It can take countless years to arrive at the point where the principal is just 20% of the original amount borrowed, so it's essential to know how your home has appreciated in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends signify declining home values, you should understand that real estate is local.

An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above 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 All City Appraisal, we're masters at determining value trends in Woodland Hills, Los Angeles County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little trouble. At which time, the homeowner can delight in 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