Shamrock Appraisals, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when buying a house. The lender's risk is generally only the difference between the home value and the amount due on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and typical value variations on the chance that a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy protects the lender if a borrower defaults on the loan and the value of the house is less than the balance of the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible. It's money-making for the lender because they secure the money, and they get the money if the borrower doesn't pay, different from a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers keep from bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, acute home owners can get off the hook sooner than expected.
It can take many years to get to the point where the principal is just 20% of the initial loan amount, so it's necessary to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home could have acquired equity before things cooled off, so even when nationwide trends signify decreasing home values, you should understand 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. It is an appraiser's job to know the market dynamics of their area. At Shamrock Appraisals, Inc., we're masters at determining value trends in Tuscaloosa, Tuscaloosa County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will most often do away with the PMI with little effort. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: