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Shamrock Appraisals, Inc. can help you remove your Private Mortgage Insurance

A 20% down payment is typically accepted when getting a mortgage. Because the liability for the lender is generally only the difference between the home value and the amount due on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and typical value variationson the chance that a borrower is unable to pay.

During the recent mortgage upturn of the last decade, it was common to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender handle the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the worth of the home is less than the loan balance.

Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is costly to a borrower. It's profitable for the lender because they obtain the money, and they get paid if the borrower doesn't pay, opposite from a piggyback loan where the lender takes in all the deficits.

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

How homebuyers can keep from bearing the cost of PMI

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law stipulates that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, acute homeowners can get off the hook a little early.

It can take many years to get to the point where the principal is only 20% of the original amount of the loan, so it's important to know how your home has appreciated 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 dropped below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home may have secured equity before things settled down, so even when nationwide trends forecast decreasing home values, you should understand that real estate is local.

An accredited, 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 understand the market dynamics of their area. At Shamrock Appraisals, Inc., we know when property values have risen or declined. We're experts at identifying value trends in Tuscaloosa, Tuscaloosa County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally drop 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:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year

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