Shamrock Appraisals, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when buying a house. The lender's risk is oftentimes only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and typical value fluctuations on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional plan protects the lender if a borrower defaults on the loan and the value of the house is lower than what is owed on the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the deficits, PMI is money-making for the lender because they secure the money, and they get the money 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 home buyers can keep from bearing the cost of PMI
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Savvy homeowners can get off the hook sooner than expected. The law pledges that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the original loan amount, so it's crucial to know how your home has grown in value. After all, every bit of appreciation you've achieved over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be following the national trends and/or your home might have acquired equity before things calmed down, so even when nationwide trends predict 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 rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Shamrock Appraisals, Inc., we know when property values have risen or declined. We're masters at recognizing value trends in Tuscaloosa, Tuscaloosa County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally do away with 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: