Have equity in your home? Want a lower payment? An appraisal from Shamrock Appraisals, Inc. can help you get rid of your PMI.
When buying a house, a 20% down payment is usually the standard. The lender's risk is oftentimes only the difference between the home value and the amount due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value fluctuations in the event a purchaser doesn't pay.
Lenders were working with 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 handle the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the worth of the home is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. It's favorable for the lender because they obtain the money, and they receive payment if the borrower defaults, separate from a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can keep from bearing the expense of PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook a little earlier.
Considering it can take many years to get to the point where the principal is only 20% of the initial loan amount, it's essential to know how your home has grown in value. After all, any appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home might have acquired equity before things settled down, so even when nationwide trends signify falling home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our 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. When faced with information from an appraiser, the mortgage company will most often drop the PMI with little anxiety. 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: