Have equity in your home? Want a lower payment? An appraisal from Property Valuation Group can help you get rid of your PMI.
It's typically known that a 20% down payment is the standard when buying a house. Considering the risk for the lender is oftentimes only the difference between the home value and the amount due on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and regular value changesin the event a purchaser doesn't pay.
The market was working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary plan covers the lender if a borrower is unable to pay on the loan and the market price of the property is lower than what the borrower still owes on the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible. It's money-making for the lender because they acquire the money, and they get paid if the borrower doesn't pay, different from a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can avoid 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 equals 78 percent of the initial loan amount. Smart home owners can get off the hook sooner than expected. The law promises that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's necessary to know how your home has increased in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be following the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends hint at plunging home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Property Valuation Group, we're masters at pinpointing 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 eliminate the PMI with little effort. 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: