Let Shamrock Appraisals, Inc. help you determine if you can get rid of your PMI
It's generally inferred that a 20% down payment is common when buying a house. Since the liability for the lender is often only the remainder between the home value and the sum due on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value fluctuationsin the event a borrower defaults.
The market was working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the worth of the property is lower than the balance of 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 expensive to a borrower. It's profitable for the lender because they obtain the money, and they receive payment if the borrower defaults, separate from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can refrain from paying PMI
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, keen home owners can get off the hook ahead of time.
It can take countless years to get to the point where the principal is just 20% of the initial amount of the loan, so it's important to know how your home has grown in value. After all, every bit of appreciation you've acquired over time counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be following the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends hint at plummeting home values, you should understand that real estate is local.
A certified, 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 keep up with the market dynamics of their area. At Shamrock Appraisals, Inc., we're experts at determining value trends in Tuscaloosa, Tuscaloosa County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will often cancel the PMI with little anxiety. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: