Appraisal Metrics can help you remove your Private Mortgage Insurance

When purchasing a home, a 20% down payment is usually the standard. The lender's liability is generally only the remainder between the home value and the sum outstanding on the loan, so the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and typical value variations in the event a purchaser defaults.

During the recent mortgage upturn of the last decade, it became common to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to endure the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the value of the house is lower than the balance of the loan.

PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible. It's money-making for the lender because they acquire the money, and they get the money if the borrower is unable to pay, opposite 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 can a home owner avoid paying PMI?

The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Acute homeowners can get off the hook beforehand. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.

It can take many years to get to the point where the principal is only 20% of the initial amount of the loan, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends predict plunging home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have secured equity before things simmered down.

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. As appraisers, it's our job to recognize the market dynamics of our area. At Appraisal Metrics, we're masters at recognizing value trends in Novi, Oakland County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. At which 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