Trying to get rid of PMI on my mortgage.

[blurredvision]

I'm interesting in paying down enough on my mortgage principal in order to get rid of the nagging PMI payment every month. According to law, you can request the removal of PMI at 80% LTV, and it will drop off automatically at 78% LTV.

I was of the understanding that the "V" in LTV was considered the value of the home (what it appraised for), but my lender is saying that it is the value of my loan, since it is the lower of the two. I paid $4k less than what the house was appraised for, so now that LTV is calculated against my loan amount and not the appraised amount, I have to pay a couple extra thousand dollars more than I thought to get to 78%.

Does this sound correct?

 

[OCGuy]

The LTV is your current loan balance versus what the house is currently worth.


When did you buy? Unless you are in a very lucky isolated market, your homes value has probably declined recently. Your LTV is probably worse than what is was when you bought the house.

 

[D1gger]

Originally posted by: peritusONE
I'm interesting in paying down enough on my mortgage principal in order to get rid of the nagging PMI payment every month. According to law, you can request the removal of PMI at 80% LTV, and it will drop off automatically at 78% LTV.

I was of the understanding that the "V" in LTV was considered the value of the home (what it appraised for), but my lender is saying that it is the value of my loan, since it is the lower of the two. I paid $4k less than what the house was appraised for, so now that LTV is calculated against my loan amount and not the appraised amount, I have to pay a couple extra thousand dollars more than I thought to get to 78%.

Does this sound correct?

I don't understand what they are saying. Loan to Value should be your mortgage amount over the value of the home (appraisal).

Are they saying that it is the current mortgage amount over the original mortgage amount?

 

[blurredvision]

Originally posted by: OCguy
The LTV is your current loan balance versus what the house is currently worth.

When did you buy? Unless you are in a very lucky isolated market, your homes value has probably declined recently. Your LTV is probably worse than what is was when you bought the house.

So why would my lender be basing LTV against what I borrowed?

I purchased 3 years ago, but my neighborhood has since been upgraded with city sewer lines, so we were hoping that might help the value a bit, even in this down market. But now that the lender isn't basing LTV against home value but against what we borrowed, it's a moot point.

 

[D1gger]

From Yahoo Finance:

How do I calculate my loan-to-value ratio (LTV)?

The loan-to-value ratio (or LTV) is one of the most important factors in your loan process. It is used to determine the limits within your housing and debt ratios and where they must fall for you to be approved. It can also determine which fees and the amount(s)you will be charged for your loan. Furthermore, it determines whether you must pay Private Mortgage Insurance (PMI) and use an impound/escrow account.
Your loan-to-value ratio (LTV) is simply the amount you are borrowing divided by the value of the subject property you are purchasing or refinancing. This gives you a simple ratio. For example, a house valued at $100,000 which you intend to purchase with an $80,000 loan (and a $20,000 down payment of your own cash) is said to have an LTV of 80 percent - that is, the loan represents 80 percent of the value of the house.

The value of your property is its appraised value OR the amount you pay for the property (the market value), whichever is lower. In the initial stages of qualification and approval, your property's value is understood to be an estimate. It will be confirmed, if necessary for your particular loan, by a professional appraiser.

 

[blurredvision]

Originally posted by: D1gger
Are they saying that it is the current mortgage amount over the original mortgage amount?

Yes. For example, let's say:

house appraised value: $100k
total borrowed: $90k

They say the 78% LTV is $70,200 instead of $78,000. This is why I'm confused.

 

[OCGuy]

Originally posted by: peritusONE

Originally posted by: OCguy
The LTV is your current loan balance versus what the house is currently worth.

When did you buy? Unless you are in a very lucky isolated market, your homes value has probably declined recently. Your LTV is probably worse than what is was when you bought the house.

So why would my lender be basing LTV against what I borrowed?

I purchased 3 years ago, but my neighborhood has since been upgraded with city sewer lines, so we were hoping that might help the value a bit, even in this down market. But now that the lender isn't basing LTV against home value but against what we borrowed, it's a moot point.

If you bought your home 3 years ago in a loan that needed PMI, you are most likely upside down on your house anyway.

If you pay down 20% of your original loan amount, but you are at 110% LTV, I cant see the lender removing your PMI.

 

[D1gger]

Originally posted by: peritusONE

Originally posted by: D1gger
Are they saying that it is the current mortgage amount over the original mortgage amount?

Yes. For example, let's say:

house appraised value: $100k
total borrowed: $90k

They say the 78% LTV is $70,200 instead of $78,000. This is why I'm confused.

Your lender is wrong, but OCGuy may be correct. You need a current appraisal to determine what the current value is. The appraisal would have to be done at your cost, by an appraiser that the lender recognizes.

 

[blurredvision]

Originally posted by: D1gger
From Yahoo Finance:

How do I calculate my loan-to-value ratio (LTV)?

The loan-to-value ratio (or LTV) is one of the most important factors in your loan process. It is used to determine the limits within your housing and debt ratios and where they must fall for you to be approved. It can also determine which fees and the amount(s)you will be charged for your loan. Furthermore, it determines whether you must pay Private Mortgage Insurance (PMI) and use an impound/escrow account.
Your loan-to-value ratio (LTV) is simply the amount you are borrowing divided by the value of the subject property you are purchasing or refinancing. This gives you a simple ratio. For example, a house valued at $100,000 which you intend to purchase with an $80,000 loan (and a $20,000 down payment of your own cash) is said to have an LTV of 80 percent - that is, the loan represents 80 percent of the value of the house.

The value of your property is its appraised value OR the amount you pay for the property (the market value), whichever is lower. In the initial stages of qualification and approval, your property's value is understood to be an estimate. It will be confirmed, if necessary for your particular loan, by a professional appraiser.

I guess that explains it then. Thanks D1gger.