Appraiz-it, LLC can help you remove your Private Mortgage Insurance

When buying a house, a 20% down payment is usually the standard. Since the liability for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and regular value changeson the chance that a purchaser defaults.

During the recent mortgage upturn of the mid 2000s, it became widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the market price of the house is lower than what the borrower still owes on the loan.

Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they obtain the money, and they get paid if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs all the costs.

Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.

How buyers can avoid bearing the expense of 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 reaches 78 percent of the initial loan amount. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook sooner than expected.

It can take countless years to get to the point where the principal is only 20% of the original loan amount, so it's crucial to know how your home has grown in value. After all, any appreciation you've accomplished over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home may have acquired equity before things cooled off, so even when nationwide trends indicate declining home values, you should understand that real estate is local.

The hardest thing for almost all homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At Appraiz-it, LLC, we're experts at pinpointing value trends in West Bloomfield, Oakland County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often do away with the PMI with little trouble. At that 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