Let Property Valuation Group help you learn if you can eliminate your PMI
A 20% down payment is usually the standard when getting a mortgage. Considering the liability for the lender is generally only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and natural value changeson the chance that a purchaser defaults.
During the recent mortgage boom of the last decade, it became widespread to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the market price of the home is less than the loan balance.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible. It's advantageous for the lender because they acquire the money, and they get the money if the borrower defaults, opposite from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer refrain from bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Smart home owners can get off the hook sooner than expected. The law designates that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
Considering it can take many years to arrive at the point where the principal is only 20% of the initial loan amount, it's necessary to know how your home has grown in value. After all, all of the appreciation you've gained over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends forecast falling home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At Property Valuation Group, we know when property values have risen or declined. We're experts at pinpointing value trends in Ferndale, Oakland County and surrounding areas. When faced with data from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: