Let Property Valuation Group help you discover if you can get rid of your PMI
A 20% down payment is usually the standard when purchasing a home. The lender's liability is generally only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser doesn't pay.
The market was working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the worth of the home is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible, PMI is costly to a borrower. It's profitable for the lender because they obtain the money, and they get the money if the borrower doesn't pay, contradictory to a piggyback loan where the lender absorbs 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 a home owner refrain from paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook sooner than expected.
It can take countless years to reach the point where the principal is only 20% of the initial amount borrowed, so it's essential to know how your home has appreciated in value. After all, any appreciation you've gained over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends indicate declining home values, you should realize that real estate is local.
The difficult thing for many homeowners 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 understand the market dynamics of our area. At Property Valuation Group, we know when property values have risen or declined. We're experts at analyzing value trends in Ferndale, Oakland County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At which 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: