I have a questions regarding PMI. Let me explain my current situation. When I bought my property in Long Beach, CA, I only put 5% down payment and took a loan with 3.85% interest rate plus a PMI ( $214). Property value was $374k back then and It has been close to 2 years. But same properties around my neighbourhood has been selling for $435k. One of my friend has a MLS account and she told me this is what my place is worth. My current loan is $340k and LTV ratio is close to 78% ( 340,000/435,000).
So I called my bank PNC and ofcourse they are not very friendly to answer any of my questions and everytime I ask a questions, they reply saying " we do not have the answer and you have to send us a written request". They have no interest in waiving off my PMI.
Now, I would like to know let's say with PNC I go for an appraisal and appraisal value come to be $420k and not $435k. Is it possible to pay off my principal after the appraisal with whatever amount that will make LTV to 78 and get rid of PMI. How long is the appraisal valid for? I do not want to pay more towards principal before even knowing the real appraised value. Also, I want to get rid of this PMI before the next housing bubble . Because If I do not get rid of this now, I will be stuck with this forever and that's what the big bank wants. Also, if my bank is not willing to cooperate, is there a way I can take any actions against them?
I would highly appreciate any replies.
@Rohit Kochar I think I understand the situation but, if not reply back and correct me. Am I correct in assuming from your numbers that your purchase price was @ $358K and your loan is for $340K and you have paid it down to @ $265K (@78%) which is what you currently owe, or do you have it wrong?
In regards to the your current PMI, they are are typically required to drop PMI when you reach 78% but, you may need to request that in writing to your lender most require it and you need to be current on your payments so far. In regards to the appraisal, it may be up to the bank whether or not they accept your appraisal depending on what type it is and who did it. I would suggest you reach out to them and ask them who they would suggest for an appraisal and which type of appraisal they will honor, then order it to their specification, be prepared to pay a few hundred dollars for it (but understand you may not even need an appraisal if you have indeed reached 78% LTV ($265K).
The other very real option you have and one that will circumvent any future looming bubble is that you could consider refinancing. If your home is indeed worth @$435K then you would be able to refinance to 75%-80% LTV depending on the lender, meaning your new loan would be $326K - $348K depending on the LTV required. If you currently still owe @ 265K, then they would deduct that to pay your current lender (PNC) and you would be left with @$61K - $83K, which you could collect as cash in hand. Of course keep in mind that any amount would be minus $2K - $5K in closing costs.
If your current loan was originally for $340K and you are still paying $214/mo. in PMI, I'm assuming your monthly principal payment plus the PMI is @ $1,808/mo. on a 30 year fixed. If you did refinance and your future lender required 75% LTV (worst case scenario) on your property that is worth $435K then you could 1) keep your current home, 2) collect $61K in cash to pursue other investing/real estate ventures, and 3) your monthly payment on your new loan of $326K even in today's higher 4.6% rates for 30 year, would be @ $1,673/mo. without any PMI ------ This is still less then your current payment.
It's up to your comfort level and goals but, why not look to refinance and get a lower monthly payment and use the $60K+ to possibly invest into other real estate? But just as you said, this only works while property values are still up such as now. Personally, I'm partial to this option.
Thank you Alex for you time! I am sorry if I wasn't clear so here is the summary again:
Property purchase price when I bought 2 years ago : $374k
Property price now as per MLS comp : $435K
Loan amount 2 years ago : $355,300 ( approx)
My current loan amount : $340K
My monthly payments including PMI : $2,300
PMI = $214
I have been current on my payments so far. I never delayed any of my payments.
I would explore the re-finance option but right now I guess the rate is close to 4.5-5% and I feel like 3.85 is a really good rate. When I bought this property , I knew this will go up and I would be able to get rid of my PMI.
If I get rid of PMI, I can still get a Home Line of equity on my house right?
So let's say I did an appraisal and appraisal value didn't come to $435k, can i Just pay the difference towards my principal and get rid of my PMI or do I need to another appraisal after paying some of the principal?
I really appreciate tour time.
Thank you so much!