Let Appraisal Metrics help you decide if you can get rid of your PMI
It's typically understood that a 20% down payment is accepted when getting a mortgage. Since the risk for the lender is usually only the difference 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 regular value fluctuationsin the event a purchaser doesn't pay.
Banks were taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower doesn't pay on the loan and the worth of the home is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. Unlike a piggyback loan where the lender takes in all the deficits, PMI is advantageous for the lender because they obtain the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can keep from bearing the cost of PMI
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Acute home owners can get off the hook a little early. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
Considering it can take countless years to reach the point where the principal is just 20% of the initial amount borrowed, it's crucial to know how your home has grown in value. After all, every bit of appreciation you've gained over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home may have gained equity before things cooled off, so even when nationwide trends predict declining home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Appraisal Metrics, we know when property values have risen or declined. We're masters at determining value trends in Novi, Oakland County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often do away with 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: