Let Property Valuation Group help you learn if you can eliminate your PMI

When purchasing a home, a 20% down payment is usually the standard. Considering the risk for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and typical value variationson the chance that a borrower doesn't pay.

During the recent mortgage boom of the mid 2000s, it was common to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the worth of the house is lower than what the borrower still owes on the loan.

PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible. It's profitable for the lender because they obtain the money, and they receive payment if the borrower defaults, different from a piggyback loan where the lender takes in all the damages.

Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.

How can homebuyers keep from paying PMI?

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Smart home owners can get off the hook beforehand. The law stipulates that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent.

It can take countless years to reach the point where the principal is only 20% of the initial loan amount, so it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends indicate plummeting home values, you should understand that real estate is local.

The hardest thing for almost all home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to understand the market dynamics of their area. At Property Valuation Group, we're experts at analyzing 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 most often remove the PMI with little anxiety. At that 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:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year