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

When buying a house, a 20% down payment is usually the standard. The lender's liability is generally only the remainder between the home value and the sum outstanding on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and regular value fluctuations in the event a purchaser is unable to pay.

During the recent mortgage upturn of the last decade, it became widespread to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender endure the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added plan covers the lender if a borrower is unable to pay on the loan and the value of the house is less than the balance of the loan.

PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the deficits, PMI is lucrative for the lender because they collect the money, and they get the money if the borrower doesn't pay.

How can a home buyer refrain from bearing the cost of PMI?

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

Since it can take countless years to get to the point where the principal is just 20% of the initial amount of the loan, it's important to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home might have gained equity before things calmed down, so even when nationwide trends indicate decreasing home values, you should realize that real estate is local.

The toughest thing for many home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to keep up with the market dynamics of their area. At Bogris Appraisal LLC, we know when property values have risen or declined. We're masters at analyzing value trends in Fair Lawn, Bergen County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often do away with 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