Have equity in your home? Want a lower payment? An appraisal from Karen A. Zirpoli - KAZ Appraisals, LLC can help you get rid of your PMI.

When buying a house, a 20% down payment is typically the standard. Considering the liability for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuationson the chance that a purchaser defaults.

The market was working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower is unable to pay on the loan and the value of the house is less than the loan balance.

Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI can be expensive to a borrower. It's favorable for the lender because they obtain the money, and they get the money if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs all the costs.

How can buyers keep from paying PMI?

The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Savvy home owners can get off the hook beforehand. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.

Because it can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's crucial to know how your home has grown in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends hint at decreasing home values, realize that real estate is local. Your neighborhood might not be minding the national trends and/or your home could have acquired equity before things calmed down.

The hardest thing for many homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to understand the market dynamics of their area. At Karen A. Zirpoli - KAZ Appraisals, LLC, we know when property values have risen or declined. We're masters at pinpointing value trends in Nokesville, Prince William County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At that time, the homeowner can retain 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