Property Valuation Group can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when purchasing a home. Considering the liability for the lender is generally only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and regular value fluctuationson the chance that a borrower is unable to pay.
During the recent mortgage boom of the last decade, it became customary to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower defaults on the loan and the market price of the house is lower than what is owed on the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the costs, PMI is beneficial for the lender because they acquire the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner refrain from paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Savvy homeowners can get off the hook ahead of time. The law states that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the initial amount of the loan, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've acquired over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be minding the national trends and/or your home may have acquired equity before things settled down, so even when nationwide trends signify plummeting home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Property Valuation Group, we're masters at pinpointing value trends in Ferndale, Oakland County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often drop the PMI with little trouble. At which 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: