Shamrock Appraisals, Inc. can help you remove your Private Mortgage Insurance

It's widely inferred that a 20% down payment is the standard when getting a mortgage. Since the liability for the lender is often only the difference between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and typical value changeson the chance that a purchaser is unable to pay.

During the recent mortgage boom of the last decade, it became customary to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender endure the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the worth of the home is less than the loan balance.

PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender takes in all the damages, PMI is favorable for the lender because they collect the money, and they get paid if the borrower doesn't pay.

How can a homebuyer refrain from bearing the cost of PMI?

The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute home owners can get off the hook ahead of time. The law promises that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent.

It can take countless years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've obtained 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 might not be reflecting the national trends and/or your home could have gained equity before things calmed down, so even when nationwide trends hint at plunging home values, you should realize that real estate is local.

The hardest thing for many home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to understand the market dynamics of their area. At Shamrock Appraisals, Inc., we're experts at pinpointing 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 generally drop the PMI with little effort. 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:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year