It’s probably a safe bet to say that everyone likes having their own home, but no one likes paying for it. Houses are expensive, and for many people, a financial stretch. Still, the satisfaction of owning your own home usually makes the difficulty of paying for it worthwhile. What really irks buyers, however, are the things you have to pay for that don’t directly contribute to home ownership, such as property taxes and private mortgage insurance.

Private mortgage insurance, or PMI, is essentially an insurance policy that protects the lender on mortgages where the loan amount represents more than 80% of the value of the property. If you buy a house with a small down payment, or none at all, you can expect PMI to be part of your monthly payment. And it isn’t cheap; the average PMI paid per month on a $200,000 home is about $125. Paying some $1500 per year for something that doesn’t yield any direct rewards to the payer is not something that most people enjoy doing.

With the average down payment on homes today running less than 5%, paying private mortgage insurance is something that virtually everyone has to do at one time or another. But it doesn’t have to stay that way. You can, under certain circumstances, persuade your lender to drop your PMI. How can you do that?

The way you do that is by demonstrating to your lender that your equity in your property now exceeds 20% of the value of the property. That could take awhile, but in some areas, such as Phoenix, property values are currently increasing at a rate of about 35% per year. If you buy a home today with a small down payment, you could find yourself in a position to drop PMI in a year! Even in markets that aren’t quite that hot, the wait may be shorter than you think. And you can always increase your equity by simply paying down your principal.

Your lender won’t drop it just for the asking, though. You will have to ask them to drop it an then you will need to demonstrate to them that the value of your property has increased to the point where their risk is sufficiently minimized. The usual way that this is done is by obtaining a property appraisal. An appraisal isn’t cheap; it will probably cost you between $300-500, depending on where you live. On the other hand, the appraisal fee only represents a few months’ worth of PMI payments. If you plan to be in the house for a number of years, it will probably be worth the expense of an appraisal.

Be aware that some lenders contractually require that you keep your PMI for a certain length of time before you may drop it. Be sure to check with your lender before you spend the money on an appraisal 

No one likes to pay for private mortgage insurance. Thanks to the brisk real estate market of the last few years, more people than ever are able to drop it quickly.

If you have a mortgage with a high interest rate, you may want to consider refinancing. You may be able to combine your debts and lower your monthly financial outlay. Ameriquest can make it possible to refinance now.

Copyright © 2005-2007 by Retro Marketing. All rights reserved.