Have equity in your home? Want a lower payment? An appraisal from Shamrock Appraisals, Inc. can help you get rid of your PMI.
It's generally inferred that a 20% down payment is common when purchasing a home. The lender's risk is usually only the difference between the home value and the sum remaining on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser defaults.
During the recent mortgage boom of the last decade, it was common to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplementary policy covers the lender in the event a borrower defaults on the loan and the market price of the property is less than the loan balance.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's profitable for the lender because they obtain the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer keep from paying PMI?
The Homeowners Protection Act of 1998 obligates 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. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, wise homeowners can get off the hook a little earlier.
It can take countless years to arrive at the point where the principal is just 20% of the original loan amount, so it's important to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not be following the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends indicate falling home values, you should understand that real estate is local.
The hardest thing for many homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At Shamrock Appraisals, Inc., we're masters at analyzing value trends in Tuscaloosa, Tuscaloosa County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally cancel 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: