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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 getting a mortgage, a 20% down payment is typically the standard. The lender's risk is oftentimes only the remainder between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser defaults.

Banks were working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental plan protects the lender in case a borrower is unable to pay on the loan and the value of the home is lower than the balance of the loan.

PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. It's beneficial for the lender because they collect the money, and they get the money if the borrower is unable to pay, contradictory to a piggyback loan where the lender absorbs all the costs.

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 keep from bearing the expense of PMI?

The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law pledges that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, smart home owners can get off the hook a little earlier.

Since it can take many years to get to the point where the principal is just 20% of the initial amount of the loan, it's necessary to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be following the national trends and/or your home may have secured equity before things settled down, so even when nationwide trends signify plunging home values, you should realize that real estate is local.

A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At The August Group Inc., we're masters at analyzing value trends in St Louis, Saint Louis County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will most often remove the PMI with little trouble. At which time, the home owner 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

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