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Have equity in your home? Want a lower payment? An appraisal from The August Group Inc. can help you get rid of your PMI.

When purchasing a home, a 20% down payment is usually the standard. The lender's liability is often only the difference between the home value and the sum due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and natural value changes in the event a purchaser defaults.

During the recent mortgage boom of the last decade, it became customary to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy guards the lender in case a borrower defaults on the loan and the worth of the house is lower than the balance of the loan.

PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible. It's advantageous for the lender because they acquire the money, and they get paid if the borrower defaults, separate from a piggyback loan where the lender consumes 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 home owner avoid bearing the expense of PMI?

The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Acute home owners can get off the hook a little early. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.

It can take many years to arrive at the point where the principal is just 20% of the initial amount of the loan, so it's important to know how your home has grown in value. After all, all of the appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home may have secured equity before things cooled off, so even when nationwide trends hint at declining home values, you should realize that real estate is local.

The hardest thing for many home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At The August Group Inc., we know when property values have risen or declined. We're experts at pinpointing value trends in St Louis, Saint Louis County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At which time, the home owner can enjoy 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