Let Property Valuation Group help you discover if you can get rid of your PMI

When purchasing a home, a 20% down payment is typically the standard. Since the risk for the lender is often only the remainder between the home value and the amount due on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and typical value variationsin the event a purchaser is unable to pay.

During the recent mortgage boom of the mid 2000s, it became widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This added policy guards the lender in case a borrower defaults on the loan and the market price of the house is lower than the balance of 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 frequently isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the damages, 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 homebuyers avoid paying PMI?

With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen homeowners can get off the hook beforehand. The law promises that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.

Since it can take countless years to get to the point where the principal is only 20% of the initial amount of the loan, it's essential to know how your home has grown in value. After all, every bit of appreciation you've achieved over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home might have acquired equity before things simmered down, so even when nationwide trends indicate plummeting home values, you should understand that real estate is local.

The difficult thing for most home owners to know 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 recognize the market dynamics of our area. At Property Valuation Group, we know when property values have risen or declined. We're experts at recognizing value trends in Ferndale, Oakland County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At that time, the home owner can retain 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