Property Valuation Group can help you remove your Private Mortgage Insurance

When purchasing a home, a 20% down payment is typically the standard. Considering the risk for the lender is usually only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value variationsin the event a borrower is unable to pay.

During the recent mortgage boom of the mid 2000s, it was customary to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender endure the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy protects the lender in case a borrower doesn't pay on the loan and the market price of the home is less than what is owed on the loan.

Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. Opposite from a piggyback loan where the lender absorbs all the costs, PMI is beneficial for the lender because they obtain 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 homebuyers can refrain from paying PMI

With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law designates that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, smart homeowners can get off the hook ahead of time.

Because it can take many years to get to the point where the principal is only 20% of the initial amount borrowed, it's necessary to know how your home has increased in value. After all, all of the appreciation you've achieved over time counts towards removing 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 heeding the national trends and/or your home might have secured equity before things calmed down, so even when nationwide trends hint at falling home values, you should realize 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 tough thing to know. It is an appraiser's job to recognize 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 often cancel the PMI with little effort. At that time, the home owner can delight in 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