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 widely inferred that a 20% down payment is common when buying a house. The lender's risk is oftentimes only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and natural value variations on the chance that a borrower is unable to pay.
Lenders were accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan guards the lender in the event a borrower is unable to pay on the loan and the market price of the house is less than the loan balance.
PMI is pricey to a borrower because 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 advantageous for the lender because they obtain the money, and they receive payment if the borrower defaults, contradictory to 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 home buyers prevent paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart homeowners can get off the hook ahead of time. The law designates that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
Considering it can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, it's important to know how your home has grown in value. After all, all of the appreciation you've accomplished over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be heeding the national trends and/or your home may have secured equity before things simmered down, so even when nationwide trends indicate plunging home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Shamrock Appraisals, Inc., we're masters at identifying 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 generally remove the PMI with little trouble. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: