Let Campbell & Associates Appraisers, Inc. help you determine if you can eliminate 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 due on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser defaults.

During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the worth of the house is less than what is owed on the loan.

PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. It's profitable for the lender because they collect the money, and they receive payment if the borrower defaults, contradictory to a piggyback loan where the lender absorbs all the losses.

How home buyers can keep from bearing the cost of PMI

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

It can take many years to get to the point where the principal is only 20% of the initial amount borrowed, so it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home may have secured equity before things calmed down, so even when nationwide trends hint at plunging home values, you should realize that real estate is local.

The difficult thing for most homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to keep up with the market dynamics of our area. At Campbell & Associates Appraisers, Inc., we're experts at recognizing value trends in Davie, Broward County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will most often remove the PMI with little anxiety. At that time, the homeowner can enjoy the savings from that point on.