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

A 20% down payment is typically accepted when buying a house. Considering the risk for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and natural value changesin the event a borrower doesn't pay.

The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional plan protects the lender in case a borrower is unable to pay on the loan and the value of the home is less than the balance of the loan.

PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped 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 defaults, unlike a piggyback loan where the lender takes in all the losses.

How can homebuyers prevent bearing the expense of PMI?

The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen homeowners can get off the hook a little earlier. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.

Since it can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, it's crucial to know how your home has grown in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends predict plummeting home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have gained equity before things simmered down.

A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At The Appraisal House, we're experts at recognizing value trends in Sparks, Washoe 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 anxiety. At which time, the homeowner 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