Shamrock Appraisals, Inc. can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is typically the standard. Because the risk for the lender is generally only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and natural value variationson the chance that a purchaser doesn't pay.
Lenders were accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental policy protects the lender in case a borrower defaults on the loan and the market price of the property is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI can be expensive to a borrower. It's favorable for the lender because they collect 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 damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner keep from bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, smart home owners can get off the hook a little earlier.
It can take many years to reach the point where the principal is only 20% of the original loan amount, so it's important to know how your home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends signify falling 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 settled down.
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 tough thing to know. It's an appraiser's job to know the market dynamics of their 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 information from an appraiser, the mortgage company will generally drop the PMI with little effort. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: