Appraisal Metrics can help you remove your Private Mortgage Insurance

When getting a mortgage, 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 expenses of foreclosure, reselling the home, and regular value changes in the event a borrower is unable to pay.

During the recent mortgage boom of the last decade, it became common to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional policy guards the lender if a borrower doesn't pay on the loan and the worth of the property is lower than what the borrower still owes on 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 can be expensive to a borrower. Separate from a piggyback loan where the lender takes in all the deficits, PMI is advantageous for the lender because they collect the money, and they get paid 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 prevent paying PMI?

With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, acute home owners can get off the hook a little earlier.

Since it can take many years to reach the point where the principal is just 20% of the original amount of the loan, it's crucial to know how your home has appreciated in value. After all, any appreciation you've accomplished over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home could have gained equity before things calmed down, so even when nationwide trends indicate declining home values, you should realize 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. It is an appraiser's job to recognize the market dynamics of their area. At Appraisal Metrics, we know when property values have risen or declined. We're experts at determining value trends in Novi, Oakland County and surrounding areas. When faced with information from an appraiser, the mortgage company will usually cancel the PMI with little anxiety. At which time, the home owner can enjoy 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