CompChek Appraisal can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is usually the standard. The lender's only exposure is generally just the difference between the home value and the balance due on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value changes in the event a purchaser doesn't pay.
During the recent mortgage upturn that our country recently experienced, it was widespread to see lenders making deals with down payments of 10, 5, 3 or sometimes 0 percent. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the market price of the property is lower than the loan balance.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the losses, PMI is favorable for the lender because they obtain the money, and they get the money if the borrower defaults.
How can home buyers refrain from paying PMI?As a result of The Homeowners Protection Act of 1998, lenders are forced to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount on most loans. Acute home owners can get off the hook a little early. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
Because it can take several years to get to the point where the principal is only 80% of the initial loan amount, it's important to know how your Michigan home has increased in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends predict declining home values, understand that real estate is local. Your neighborhood might not be adopting the national trends and/or your home might have gained equity before things simmered down.
The toughest thing for most consumers to determine is whether their home equity has exceeded the 20% point. A certified, Michigan licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At CompChek Appraisal, we know when property values have risen or declined. We're masters at analyzing value trends in Oakland County, and surrounding areas. When faced with data from an appraiser, the mortgage company will generally remove the PMI with little trouble. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: