Help me get out of PMI...and "learn me" about portfolio loans

7 Replies

I currently am owner-occupying a duplex and renting the other side out. I bought it with a 3.5% down FHA loan. This property doesn't cashflow with me living in it, but it allows me to live very very cheaply. I like it so far, but I'm paying almost $200/month in PMI that I'd like to get rid of. Around here, duplexes appraise very poorly because most duplexes are in the 'hood. My duplex is an oddity though, its "ITB Raleigh" and in a gorgeous area surrounded by million dollar houses. If it were a SFR home, it would be worth approximately 125% of what I paid for it last August. So with that in mind, I'd like to try some innovative financing strategies to get rid of PMI and lower my total expenses.

Here's my plan.  I'd like to try getting the place appraised as two separate units (condo conversion?), then refinance the two properties with a portfolio loan.  That should bump the appraised value up high enough that my remaining balance is less than 80% of the appraised value.  

Is that legal/ethical?  Is the interest rate on a portfolio loan so high that its not worth it?  What kind of LTVs do portfolio loans allow?  Would I get eaten alive in taxes?

You will pay many times more in setting up the condo than you'd pay in PMI. Best bet now, wait til you have 22% equity, refi to conventional. Did you buy this before or after July-ish of last year? If after, then yes your FHA MIP is for the life of the loan.

I didn't realize Cary went ITB... Sounds like you will have at a minimum a zoning issue (rezoning) or depending on the age, will need a waiver for (special) variance for your re-classification and property card change. I believe the fees may exceed your savings.

Originally posted by @Chris Martin :

I didn't realize Cary went ITB... Sounds like you will have at a minimum a zoning issue (rezoning) or depending on the age, will need a waiver for (special) variance for your re-classification and property card change. I believe the fees may exceed your savings.

 Haha yea I guess I forgot to update my location when I moved.  Im in Raleigh now, near Brooks and Wade Ave.  is there anywhere that you know of where I can read about the zoning restrictions and how to alter them? The city gov. website isn't that helpful, maybe I'm looking in the wrong place. 

I'm not sure about Raleigh. I am about ready to go through a similar but different request (lot change) in Garner. I've already been told (unofficially, I guess) my lot split request will be denied. I've never done anything like you're proposing in Raleigh. Try the city planning department, I guess.

@Matt Rothwell  

Pardon the formatting as I just copied and pasted this but it's taken from Appendix C: The Rezoning Process contained within the Raleigh Zoning Handbook:

APPENDIX C

The Rezoning Process

Whom do I contact for rezonininformation?

If you want to rezone a piece of property, you should make an appointment with the staff in the Department of City Planning. The Department is located at One Exchange Plaza, 2nd and 3rd floor.

For additional information or to receive an application, please call the Department of City Planning at 516-2626. (fax 516-2684). Applications are available on the website: www.raleighnc.gov/forms/planning/applications_and_checklists/rezoningpdf.

What do I need to consider when determining if a petition should be submitted?

If a zoning change is desired, contact the Department of City Planning (516-2626) to request a rezoning pre-application submittal meeting. If a specific land use is desired, the staff can help the applicant determine the most appropriate district for rezoning. If no specific land use is envisioned, staff will provide the applicant with information about allowable uses and applicable regulations of the different zoning categories. 

I'd call that 516 phone number and ask to speak to someone about the zoning restrictions.

I think @Wayne Brooks has the right idea. I'd stay vigilant and get the LTV below 80%. Once you can refi out of it, you should be much closer to cash flowing!

Originally posted by @Kerry Smith :

I think @Wayne Brooks has the right idea. I'd stay vigilant and get the LTV below 80%. Once you can refi out of it, you should be much closer to cash flowing!

 Well that's been the plan since I got the house.  I just was wondering if there was another way I could get it done quicker.  After all, who wants to be paying an extra $200/month if you don't have to?