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 understood that a 20% down payment is common when getting a mortgage. Because the liability for the lender is often only the difference between the home value and the sum due on the loan, the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and natural value fluctuationson the chance that a purchaser is unable to pay.

During the recent mortgage boom of the last decade, it became common to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender manage the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added policy takes care of the lender in the event a borrower defaults on the loan and the market price of the property is lower than the loan balance.

Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible, PMI can be expensive to a borrower. It's money-making for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, contradictory to a piggyback loan where the lender absorbs all the deficits.

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

How can homebuyers avoid paying PMI?

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, acute home owners can get off the hook a little earlier.

It can take countless years to get to the point where the principal is just 20% of the original loan amount, so it's important to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends hint at plummeting home values, be aware that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have gained equity before things settled down.

The toughest thing for many home owners to know is just when their home's equity goes over 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 know when property values have risen or declined. We're experts at determining value trends in Tuscaloosa, Tuscaloosa County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally remove the PMI with little effort. At which time, the home owner can enjoy 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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