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

It's typically known that a 20% down payment is common when getting a mortgage. The lender's liability is usually only the remainder between the home value and the sum outstanding on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and regular value changes in the event a person is unable to make payment.

Lenders were taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender manage the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower doesn't pay on the loan and the worth of the house is less than the balance of the loan.

PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. It's advantageous for the lender because they obtain the money, and they receive payment if the borrower is unable to pay, contradictory to a piggyback loan where the lender takes in all the damages.

How homebuyers can prevent bearing the cost of PMI

The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law designates that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook sooner than expected.

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

The hardest thing for almost all home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At , we know when property values have risen or declined. We're experts at recognizing value trends in , Tooele County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually cancel the PMI with little effort. At that 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