Have equity in your home? Want a lower payment? An appraisal from Shamrock Appraisals, Inc. can help you get rid of your PMI.
A 20% down payment is typically the standard when purchasing a home. The lender's risk is often only the difference between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value variations in the event a borrower doesn't pay.
Lenders were working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the additional risk of the small down payment with Private Mortgage Insurance or PMI. This added policy protects the lender if a borrower doesn't pay on the loan and the worth of the property is lower than what the borrower still owes on the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible. It's beneficial for the lender because they secure the money, and they get paid if the borrower defaults, 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 paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, keen home owners can get off the hook ahead of time.
It can take many years to get to the point where the principal is only 20% of the initial amount of the loan, so it's essential to know how your home has increased in value. After all, every bit of appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home may have secured equity before things cooled off, so even when nationwide trends indicate decreasing home values, you should understand that real estate is local.
The hardest thing for almost all home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Shamrock Appraisals, Inc., we're masters at pinpointing value trends in Tuscaloosa, Tuscaloosa County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often drop the PMI with little anxiety. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: