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

When getting a mortgage, a 20% down payment is usually the standard. The lender's liability is often only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower doesn't pay.

During the recent mortgage boom of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the market price of the property is less than what the borrower still owes on the loan.

PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible. Different from a piggyback loan where the lender consumes all the deficits, PMI is profitable for the lender because they obtain the money, and they get paid if the borrower defaults.

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

How can a home owner prevent bearing the expense of PMI?

With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, acute home owners can get off the hook sooner than expected.

It can take countless years to reach 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 accomplished over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends hint at plunging home values, realize that real estate is local. Your neighborhood might not be minding the national trends and/or your home could have secured equity before things cooled off.

The difficult thing for almost all homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to understand the market dynamics of their area. At Shamrock Appraisals, Inc., we're experts at analyzing value trends in Tuscaloosa, Tuscaloosa County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will often cancel the PMI with little anxiety. At which time, the home owner can retain 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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