Let Shamrock Appraisals, Inc. help you discover if you can cancel your PMI
It's largely understood that a 20% down payment is accepted when buying a house. Since the risk for the lender is oftentimes only the difference between the home value and the sum remaining on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value changeson the chance that a borrower is unable to pay.
During the recent mortgage boom of the last decade, it was customary to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental plan covers the lender in case a borrower defaults on the loan and the value of the property is lower than what is owed on the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible. It's advantageous for the lender because they obtain the money, and they receive payment if the borrower doesn't 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 can buyers avoid bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Acute home owners can get off the hook sooner than expected. The law promises that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
Considering it can take countless years to reach the point where the principal is only 20% of the original amount of the loan, it's important to know how your home has increased in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends forecast declining home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home might have gained equity before things simmered down.
The hardest thing for almost all home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Shamrock Appraisals, Inc., we know when property values have risen or declined. We're experts at determining value trends in Tuscaloosa, Tuscaloosa County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At which 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: