Cancelling PMI mortgage insurance via appreciation

[PokerGuy]

Originally posted by: 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.

In that case, you can try convincing the lender that they are going to lose your current and future business, but that's really the only leverage you have. Figure out if paying the PMI is more than the difference in the rate, but that's probably not the case since you'll stop paying PMI when you reach 20% anyway.....

 

[timswim78]

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 recently inquired about this myself. I found out that the loan has to be two years old in order to cancel PMI via appreciation. Here is more info:

https://www.goodmortgage.com/mortgage_school/MS_how_to_remove_PMI.htm

"The Private Mortgage Insurance act took effect in July of 1999. It gives homeowners a number of rights.

1) Lenders have to give you a written statement explaining that you have PMI and when you'll be allowed to cancel it.
2) The lender must allow you to cancel PMI when your equity is 22% or more.
3) And you can ask for permission once your equity reaches 20%.

The new law only affects new mortgages funded after July, 1999, but Fannie Mae and Freddie Mac have said they will apply the new rules to the older loans."

 

[timswim78]

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?

In order to get the value, you are going to have to get an appraisal via one of their apprasiers. This will cost somewhere between $250 and $500.

 

[shuttleboi]

Originally posted by: timswim78
I recently inquired about this myself. I found out that the loan has to be two years old in order to cancel PMI via appreciation. Here is more info:

<a target=_blank class=ftalternatingbarlinklarge href="https://www.goodmortgage.com/mortgage_school/MS_how_to_remove_PMI.htm">https://www.goodmortgage.com/mortgage_school/MS_how_to_remove_PMI.htm</a>

"The Private Mortgage Insurance act took effect in July of 1999. It gives homeowners a number of rights.

1) Lenders have to give you a written statement explaining that you have PMI and when you'll be allowed to cancel it.
2) The lender must allow you to cancel PMI when your equity is 22% or more.
3) And you can ask for permission once your equity reaches 20%.

The new law only affects new mortgages funded after July, 1999, but Fannie Mae and Freddie Mac have said they will apply the new rules to the older loans."

thanks for the information. Where on that webpage does it say that the loan must be two years old?

 

[QED]

Originally posted by: PokerGuy

Originally posted by: 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.

In that case, you can try convincing the lender that they are going to lose your current and future business, but that's really the only leverage you have. Figure out if paying the PMI is more than the difference in the rate, but that's probably not the case since you'll stop paying PMI when you reach 20% anyway.....

Or, option #2 is to take out a second loan (preferably a HELOC) and use part of the proceeds to pay down your first mortgage so it is at 80%. The rate on your second loan will be a bit higher, but it will be tax deductible and you can pay it off whenever you want.

 

[shuttleboi]

UPDATE: I just spoke on the phone with my lender. They said they *would* consider my gain in equity due to appreciation in order to remove the PMI, *but* they would not do it until 2 years had passed because I need to show I'm able to make those payments on time. I asked about refinancing, but the interest rates have gone up since the time I bought the house. So I guess now all I can do is make those payments for another 1.5 years. That's gonna be about $4000 lost.

 

[spidey07]

you may be able to get another mortgage for less and use that to avoid PMI.

 

[Pantoot]

Originally posted by: shuttleboi
UPDATE: I just spoke on the phone with my lender. They said they *would* consider my gain in equity due to appreciation in order to remove the PMI, *but* they would not do it until 2 years had passed because I need to show I'm able to make those payments on time. I asked about refinancing, but the interest rates have gone up since the time I bought the house. So I guess now all I can do is make those payments for another 1.5 years. That's gonna be about $4000 lost.

For $4000 it probably would be worthwhile to get a home equity loan or line and pay down to 79%.

 

[QED]

Originally posted by: shuttleboi
UPDATE: I just spoke on the phone with my lender. They said they *would* consider my gain in equity due to appreciation in order to remove the PMI, *but* they would not do it until 2 years had passed because I need to show I'm able to make those payments on time. I asked about refinancing, but the interest rates have gone up since the time I bought the house. So I guess now all I can do is make those payments for another 1.5 years. That's gonna be about $4000 lost.

Wow... for $4000, I'd definately take my earlier advice (with an assist from Pantoot):

Or, option #2 is to take out a second loan (preferably a HELOC) and use part of the proceeds to pay down your first mortgage so it is at 80%. The rate on your second loan will be a bit higher, but it will be tax deductible and you can pay it off whenever you want.

 

[Britboy]

Your lender is feeding you bullsh1t. They have to drop PMI if you have an appraisal that shows you have the equity. They just want to extract another 2 years of payments out of you.

I got rid of PMI on our house several years ago, they had the gall to tell me because it was from appreciation I had to have 25% rather than the standard 20%. My appraiser took care of that for me😉

Don't let em screw you around

 

[boggsie]

Originally posted by: Britboy
Your lender is feeding you bullsh1t. They have to drop PMI if you have an appraisal that shows you have the equity. They just want to extract another 2 years of payments out of you.

I got rid of PMI on our house several years ago, they had the gall to tell me because it was from appreciation I had to have 25% rather than the standard 20%. My appraiser took care of that for me 😉

Don't let em screw you around

How does an appraiser take care of that for you ? I'm not trying to be mean, I just don't understand what leverage an appraiser can have over a lender. Was your loan FHA or conventional?

 

[xgsound]

5.3% is a very good rate indeed. That may be why they are not dropping the PMI and resisting any change. (they have to make money somewhere) Whatever "fees" you paid to get that rate are paid and gone, and now they're holding your feet to the fire for the rest of the deal. It sounds as though talking to them any further will be fruitless right now.


But now the scene has changed. It's not that you have a bad deal. It's that you can do better. You are already in the house and can (and should) take a few hours every week to look for another lender that wants a 80/20 loan on there books with a 1 year payment record. This time you hold all the cards, but you have to play them to win. You have nothing to lose, and can insist on little (> $1,000) or no fees (for anything) with a good interest rate. If no deal materializes, you'll know you've got the best deal you can get. If a lender says yes ... great.

Boggsie: The appraiser finds the comparables that prove that equity is over 25%.



Jim