Let Allied Real Estate Appraisers help you figure out if you can eliminate your PMIA 20% down payment is usually accepted when getting a mortgage. The lender's liability is usually only the remainder between the home value and the sum outstanding on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and natural value changes in the event a borrower doesn't pay.
Lenders were working with down payments discounted to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender endure the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender in the event a borrower doesn't pay on the loan and the value of the house is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI is pricey to a borrower. It's money-making for the lender because they acquire the money, and they get paid if the borrower defaults, different from a piggyback loan where the lender consumes all the damages.
How home buyers can refrain from paying PMIThe Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute homeowners can get off the hook a little earlier. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take several years to arrive at the point where the principal is only 80% of the initial loan amount, so it's important to know how your Michigan home has increased in value. After all, every bit of appreciation you've gained over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not follow national trends and/or your home might have gained equity before the economy declined. So even when nationwide trends hint at decreasing home values, you should realize that real estate is local.
The difficult thing for many consumers to determine is just when their home's equity goes over the 20% point. A certified, Michigan licensed real estate appraiser can certainly help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Allied Real Estate Appraisers, we know when property values have risen or declined. We're experts at determining value trends in Flint, Genesee County, and surrounding areas. When faced with data from an appraiser, the mortgage company will often drop the PMI with little trouble. At that time, the homeowner can relish 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