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 generally inferred that a 20% down payment is accepted when purchasing a home. The lender's risk is often only the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser defaults.
During the recent mortgage upturn of the mid 2000s, it was customary to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the market price of the property is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI can be pricey to a borrower. It's beneficial for the lender because they secure the money, and they receive payment if the borrower defaults, opposite from a piggyback loan where the lender consumes 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 a buyer keep from bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, smart home owners can get off the hook sooner than expected.
Because it can take countless years to reach the point where the principal is only 20% of the initial loan amount, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've acquired over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home may have gained equity before things calmed down, so even when nationwide trends predict falling 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 hard thing to know. It is an appraiser's job to understand the market dynamics of their area. At Shamrock Appraisals, Inc., we're masters at pinpointing value trends in Tuscaloosa, Tuscaloosa County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: