Shamrock Appraisals, Inc. can help you remove your Private Mortgage Insurance
It's widely known that a 20% down payment is the standard when purchasing a home. Considering the liability for the lender is generally only the difference between the home value and the sum due on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and typical value variationsin the event a borrower is unable to pay.
Lenders were accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional policy takes care of the lender if a borrower doesn't pay on the loan and the worth of the house is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible, PMI can be costly to a borrower. It's money-making for the lender because they acquire the money, and they get the money if the borrower defaults, opposite from 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 home owners prevent bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, keen home owners can get off the hook a little earlier.
Because it can take many years to arrive at the point where the principal is just 20% of the initial amount of the loan, it's crucial to know how your home has increased in value. After all, every bit of appreciation you've accomplished 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 following the national trends and/or your home could have secured equity before things calmed down, so even when nationwide trends predict decreasing home values, you should understand that real estate is local.
The difficult 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 recognize the market dynamics of our 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 data from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: