Lately, with home prices rising extremely fast, it's been really tough for buyers to cobble together a pretty decent down payment. If you out put down less than 20% down payment, the chances are that you may be paying private mortgage insurance (PMI). The private mortgage insurance cost extra - $16 to $50 a month for every $100,000 of your debt - may seem so inconsequential that you forget you're paying it, but it adds up over time. If you took your mortgage out after July 1998, your lender must automatically cancel your PMI once you've paid off 22% of the loan.
But as long as you've paid the loan on time for two years, you an ask that PMI be discontinued when your equity reaches 20%.
Here's where rising prices become your friend: You may hit the 20% mark sooner than you expected if prices in your area have risen significantly - all that gain belongs to you, not the lender. You'll have to spend about $350 for an appraisal to prove that you gains and principal payments add up to 20%. But just think about the few months of savings from private mortgage insurance.
It will save you big money in the future.