Let Shamrock Appraisals, Inc. help you determine if you can get rid of your PMI

When getting a mortgage, a 20% down payment is usually the standard. Since the risk for the lender is usually only the difference between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and typical value variationsin the event a borrower doesn't pay.

Lenders were accepting down payments down to 10, 5 and even 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 answer is Private Mortgage Insurance or PMI. This supplementary policy covers the lender in case a borrower defaults on the loan and the worth of the house is less than what is owed on the loan.

PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the costs, PMI is advantageous for the lender because they secure the money, and they get paid if the borrower is unable to pay.

How can homeowners keep from bearing the cost of PMI?

The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Savvy home owners can get off the hook beforehand. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.

Considering it can take countless years to reach the point where the principal is only 20% of the initial loan amount, it's essential to know how your home has appreciated in value. After all, any appreciation you've gained over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends predict falling home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have secured equity before things calmed down.

The toughest thing for most 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 is an appraiser's job to keep up with the market dynamics of their area. At Shamrock Appraisals, Inc., we know when property values have risen or declined. We're experts at pinpointing value trends in Tuscaloosa, Tuscaloosa County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often remove the PMI with little trouble. At which 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:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year