Cancelling PMI mortgage insurance via appreciation

[shuttleboi]

I am paying PMI and want to know how to get rid of it after my property's value has appreciated.

Let's say I bought a condo at 200K and put down 10% = 20K. I've had to pay PMI since my paid principal was less than 20% = 40K.

I have since made enough payments to have 15% = 30K. I basically need another 10K to cancel the PMI.

However, my condo has appreciated by 50K since I bought it. I've also done some fix-ups (paint, new kitchen, etc.). My thinking is that my equity in the house is 30K + 50K = 80K, which is greater than the original 40K, which should make me eligible to cancel PMI. Is this correct?

 

[olds]

Ask you lender. Maybe they will let you do an appraisal but I bet it's based on loan balance and purchase price.
We bought a new home in June and we put down 20% so we wouldn't have to pay PMI.

 

[Engineer]

Call your lender and ask them to drop the PMI based on appreciation of the property value. They should send someone, usually a real estate agent, out to do a market value assessment (not a full appraisal). Usually takes a few weeks to drop off if approved.

Cost me about $50.00 to get it done but saved my hundreds if not thousands.

 

[JulesMaximus]

Ask your lender. I did this when we bought our first home years ago and it wasn't a problem. I think they may have had an appraiser come out but that's it. Well worth asking for.

 

[allisolm]

Is this correct?

I don't think so. The mortgage company doesn't care how much your condo MIGHT sell for. All they care about normally is that you pay the mortgage down to less than 80% of the original property value before they will let you off the hook for PMI. Someone please correct me if this is wrong.

http://www.ftc.gov/bcp/conline/pubs/alerts/pmialrt.htm

"Your PMI also can be canceled, when you request - with certain exceptions - when you reach 20 percent equity in your home based on the original property value, if your mortgage payments are current."

 

[Engineer]

Originally posted by: allisolm
Is this correct?

I don't think so. The mortgage company doesn't care how much your condo MIGHT sell for. All they care about normally is that you pay the mortgage down to less than 80% of the original property value before they will let you off the hook for PMI. Someone please correct me if this is wrong.

I had not paid down to 80% and they dropped it for me upon market value. They are looking for the 80/20% point on their investment. If the property value goes up so that you owe less than 80%, statistics show that you are much less likely to default (after owning 20% of your property's value). And if you did default at that point, the lender could recoup their money much easier.

(IIRC)

EDIT:

You bring up a good point that wasn't such a point when I bought my home. Today, in parts of the country, you could buy a property with little (even zero down) and pay PMI on it. The property values are appreciating so fast that they could zoom past the 80/20 mark in record times. Stats show that people that are under the 80/20 point are much less likely to default...however, it doesn't mention the recent huge risings in value (i.e. It isn't the owner paying the value down to the 80/20 point, it is the home rising in value to arrive at the 80/20 point.) Makes me wonder if lenders will (or have) adjusted this into their statistical models for PMI payments...hmmmm?

 

[EvilPaper]

Most mortgage companies may be able to help you. However, there is no law that requires them to take in consideration current property values, when evaluating if PMI can be cancelled.

Your mortgage company should send out an annual notice regarding your PMI, and should have insturctions on how to request it be cancelled and what the requirements are.

 

[PingSpike]

A friend of mine at work got this done, although it was a pain in the ass he said. I'm not sure all mortgage companies will do this though.

 

[Mill]

Originally posted by: allisolm
Is this correct?

I don't think so. The mortgage company doesn't care how much your condo MIGHT sell for. All they care about normally is that you pay the mortgage down to less than 80% of the original property value before they will let you off the hook for PMI. Someone please correct me if this is wrong.

http://www.ftc.gov/bcp/conline/pubs/alerts/pmialrt.htm

"Your PMI also can be canceled, when you request - with certain exceptions - when you reach 20 percent equity in your home based on the original property value, if your mortgage payments are current."

This is wrong. If you have a non-shady lender they will most of the time cancel PMI if there is DECENT appreciation.

 

[SearchMaster]

It was no problem at all for me. My property appraised 50% higher than the purchase price after a year; I even hired my own appraiser to do the report and the bank dropped the PMI.

 

[xgsound]

This will vary greatly with the lender. Some will resist this with every means at thier disposal while others will be happy to get another 80/20 mortgage on the books.

What you can do is call the lender and see what they can do for you and when. If they can't help soon enough, look for other lenders that will re-finance with little to no fees, and considering current market value. You will find a lender that will be glad to take 80/20 business from there competitors, there are plenty of them out there.


Jim

 

[shuttleboi]

UPDATE: I followed up with my mortgage lender and got this reply:

To cancel PMI, this must apply: the principal balance of your loan is paid down to a loan-to-value ration of 80% or less, based on the original value of your home when your loan was closed. The loan-to-value (LTV) ratio is defined as the current unpaid principal balance of the loan divided by the lower of the sales price of your home or the appraised value of your home at the time your loan was closed. We will need to certify that the original value of your home has not declined.

What should I make of this?

 

[QED]

Originally posted by: shuttleboi
UPDATE: I followed up with my mortgage lender and got this reply:

To cancel PMI, this must apply: the principal balance of your loan is paid down to a loan-to-value ration of 80% or less, based on the original value of your home when your loan was closed. The loan-to-value (LTV) ratio is defined as the current unpaid principal balance of the loan divided by the lower of the sales price of your home or the appraised value of your home at the time your loan was closed. We will need to certify that the original value of your home has not declined.

What should I make of this?

Sounds like they want to play hard ball. They are under no legal obligation to remove your PMI, so it looks like they are going to try to stick it to you.

I especially like the last line...

Normally I'd say jus try to work with your current lender (ie, tell them you are considering refinancing with a different lender) and see if something can be worked out. But it sounds like this lender isn't one worth keeping, so just find another one...

You might not only save yourself PMI, but get a lower interest rate to boot...

 

[BlueWeasel]

Maybe I'm interpreting the response wrong, but it appears they don't factor in appreciation of the home. Is that legal?

 

[gigapet]

appreciation of the home is a factor in determinign whether you have enough equity to eliminate the PMI insurance. You should talk to a mortgage broker about a refi as you seem mor ethan eleigible.

 

[FrustratedUser]

Originally posted by: shuttleboi
I am paying PMI and want to know how to get rid of it after my property's value has appreciated.

Let's say I bought a condo at 200K and put down 10% = 20K. I've had to pay PMI since my paid principal was less than 20% = 40K.

I have since made enough payments to have 15% = 30K. I basically need another 10K to cancel the PMI.

However, my condo has appreciated by 50K since I bought it. I've also done some fix-ups (paint, new kitchen, etc.). My thinking is that my equity in the house is 30K + 50K = 80K, which is greater than the original 40K, which should make me eligible to cancel PMI. Is this correct?

I know this is not really relevant to this thread but going with PMI is never a good deal. A second mortgage would have been better.

Sorry, I'm leaving now.

 

[EtOH]

PMI is paid if you owe > 80% of the APPRAISED value, not the loan value. I had the same situation on my old house. Once it raised up in value enough I had PMI dropped despite the loan amount.

Get your condo appraised and the have PMI cancelled.

 

[codeyf]

Originally posted by: shuttleboi
UPDATE: I followed up with my mortgage lender and got this reply:

To cancel PMI, this must apply: the principal balance of your loan is paid down to a loan-to-value ration of 80% or less, based on the original value of your home when your loan was closed. The loan-to-value (LTV) ratio is defined as the current unpaid principal balance of the loan divided by the lower of the sales price of your home or the appraised value of your home at the time your loan was closed. We will need to certify that the original value of your home has not declined.

What should I make of this?

:thumbsdown:

A good lender would be willing to send someone out to do an assesment or at the very least allow you to provide documentation showing the appreciated value of the home. At which point, once the 80/20 has been shown, they should remove PMI.

FWIW, our Mortgage is thru BofA. We recently just asked the same thing. They said they would not remove it since we have a 2nd mortgage on our home. However, after reading this post, I think I'm going to look in to it further. Even factoring in the second, an appraisal would but our equity over 20%.

 

[QED]

Originally posted by: BlueWeasel
Maybe I'm interpreting the response wrong, but it appears they don't factor in appreciation of the home. Is that legal?

Yes.

They are only required by law to remove PMI when the current loan balance is less than 80% of the original sales price (or original appraised value).

However, most lenders will voluntarily remove it when requested if the home has appreciated enough that a refi of the existing loan would not be subject to PMI.

If your lender won't do this, call their bluff and refi with a new lender.

 

[spidey07]

yep, sounds like they are being difficult. Of course it is legal, they don't HAVE to remove PMI on appraised value as far as I know. all this fine print was buried with your mortgage.

you could look at refinancing or at least shop around to see if you can get past 80/20 LTV. But you'll have to factor in the refi costs to see if it is advantageous to you.

-edit- I also agree that one should never have PMI and use a piggy-back loan to cover the difference. Normally less than PMI and tax deductible.

 

[Bryophyte]

I couldn't get my original lender to play ball, so I refinanced with a new lender (and dropped my interest rate quite a bit in the process, woot!)

 

[Engineer]

Originally posted by: BlueWeasel
Maybe I'm interpreting the response wrong, but it appears they don't factor in appreciation of the home. Is that legal?

While it sucks, it is legal. Sounds like what I meantioned above in that they want you to pay 20% of the original value of the home without appreciation to show that you are a worthy borrower to drop the PMI. In other words, you could buy a house with zero down, have it appreciate 20% in 1 year and not really show that you are in that 80% category which statistics have shown to be more likely not to default.

You may indeed have to have the remaining loan/original value down to 80% to cancel the PMI.

 

[BlueWeasel]

Originally posted by: Engineer

Originally posted by: BlueWeasel
Maybe I'm interpreting the response wrong, but it appears they don't factor in appreciation of the home. Is that legal?

While it sucks, it is legal. Sounds like what I meantioned above in that they want you to pay 20% of the original value of the home without appreciation to show that you are a worthy borrower to drop the PMI. In other words, you could buy a house with zero down, have it appreciate 20% in 1 year and not really show that you are in that 80% category which statistics have shown to be more likely not to default.

You may indeed have to have the remaining loan/original value down to 80% to cancel the PMI.

It just makes me glad to know my mortgage does allow the current appraised value to be used against the PMI.

 

[PokerGuy]

Basically, it depends on the lender. Technically, they usually go by the value of the property at the time the loan was closed, not the current value of the property.

If the lender refuses to drop the PMI even though your property value has increased significantly (so your LTV ratio is less than 80%), you should consider simply re-financing and getting rid of the PMI that way.

 

[shuttleboi]

I could refinance, but the rates are higher than my current rate. I got 5.3% on a 30-year-fixed last April. They are about 0.5 more now.