Shamrock Appraisals, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when purchasing a home. The lender's liability is generally only the difference between the home value and the sum outstanding on the loan, so the 20% provides 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.
Banks were working with down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender in case a borrower is unable to pay on the loan and the market price of the property is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's favorable for the lender because they collect the money, and they get paid if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers refrain from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Wise home owners can get off the hook beforehand. The law designates that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
Because it can take countless years to reach the point where the principal is only 20% of the initial amount borrowed, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home might have acquired equity before things settled down, so even when nationwide trends indicate declining home values, you should understand that real estate is local.
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 understand the market dynamics of their area. At Shamrock Appraisals, Inc., we know when property values have risen or declined. We're experts at recognizing value trends in Tuscaloosa, Tuscaloosa County and surrounding areas. Faced with data from an appraiser, the mortgage company will often cancel the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: