Shamrock Appraisals, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when buying a house. The lender's risk is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower is unable to pay.
During the recent mortgage boom of the last decade, it was common to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the worth of the house is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender takes in all the losses, PMI is lucrative for the lender because they secure the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners avoid bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute homeowners can get off the hook ahead of time. The law guarantees that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
Because it can take many years to reach the point where the principal is only 20% of the original loan amount, it's essential to know how your home has grown in value. After all, any appreciation you've gained over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends predict plummeting home values, understand that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have acquired equity before things calmed 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. It's an appraiser's job to recognize the market dynamics of their area. At Shamrock Appraisals, Inc., we're experts at identifying value trends in Tuscaloosa, Tuscaloosa County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: