Property Valuation Group can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when buying a house. Since the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuationsin the event a purchaser is unable to pay.
The market was taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the market price of the house is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible, PMI can be expensive to a borrower. Unlike a piggyback loan where the lender absorbs all the deficits, PMI is favorable for the lender because they collect the money, and they receive payment if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, wise home owners can get off the hook a little early.
It can take countless years to arrive at the point where the principal is only 20% of the original loan amount, so it's necessary to know how your home has increased in value. After all, any appreciation you've gained over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home may have gained equity before things calmed down, so even when nationwide trends hint at declining home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It's an appraiser's job to understand the market dynamics of their area. At Property Valuation Group, we're masters at identifying value trends in Ferndale, Oakland County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often remove the PMI with little anxiety. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: