Property Valuation Group can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is usually the standard. Because the risk for the lender is usually only the difference between the home value and the sum remaining on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and natural value fluctuationson the chance that a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it became customary to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender in the event a borrower doesn't pay on the loan and the worth of the property is lower than the loan balance.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the damages, PMI is money-making for the lender because they collect the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Smart home owners can get off the hook a little early. The law promises that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
Considering it can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's important to know how your home has grown in value. After all, all of the appreciation you've gained over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be following the national trends and/or your home might have secured equity before things calmed down, so even when nationwide trends forecast declining home values, you should realize that real estate is local.
The toughest thing for almost all home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Property Valuation Group, we're experts at identifying value trends in Ferndale, Oakland 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 generally cancel the PMI with little anxiety. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: