Can I remove PMI from my loan with new appraisal?

Question

Chris Mason · Answer

@Lauren Burkert - Ideally you will want them to drop PMI without having to refinance. If they refuse to entertain this citing policy XYZ and you are forced to refinance, do not reward bad behavior: refinance with someone else.

If they are down to drop PMI without refinancing, and you are given the choice between paying for a cheap BPO or drive by appraisal, and a more expensive full appraisal, to confirm your equity position, pay for the full actual appraisal. BPOs and drive by appraisals often only capture the "at foreclosure" value that assumes you have been neglecting the interior and deferring all maintenance, not the full retail market value of your well maintained (and improved!) home. If you think about what purpose is served by having PMI, it will make sense why they might want the BPO or drive by that only captures "at foreclosure" value. But take the full appraisal that will capture the full ARV of your home.

Jonathan G. · Answer

Here is a cool link that allows you to play around with your mortgage rate.  The 5/1 arm is on a 30 year term by the way.  You can add your rate that you have now and see where your principal balance is at 60 months vs where your principal balance would be with the 1.9%.  You can also add extra payments and such.  I use it to play around with for different scenarios.  Hope this helps.  https://www.dropbox.com/s/alvj8dwkh12rnd0/Sample%20Mortgage%20Calculator.xls?dl=0

Jonathan G. · Answer

@Lauren Burkert Hey, there!  I am from Tyler as well.  I live in Knollwood off of Old Jacksonville rd in South Tyler. My wife and I are currently building a house across from where we currently live.  It will be finished before Mid June.  We also had PMI on our current house and when we move into our new house we will be renting out our current house.  I made a great connection with a credit union in tyler, called Teachers Credit Union.  They are offering an amazing 5/1 arm for 1.9%.  We are closing in a few days.  We did that so we would cash flow more when we rent out our current house.

The qualifications at the credit union for a refi was if you had credit score of 680 or better you would only need 10% equity in your house.  If you have lower then a 680 you would need 20% equity in the house.

I know not a lot of people like 5/1 arm's but this interest rate was so low and when you see how much of your payment is going to your principal during the 5 years it will amaze you.  So we decided to take advantage of the banks low interest rate for 5 years while we rent it out.  At the end of the 5 years we will have paid down so much principal.  At the end of the 5 years we can either modify and avoid closing cost all together or refinance back into a 30 year fixed.  If we decide to sell at the end of the 5 years we will most likely do a 1031 exchange into another property so we will not have to pay any capital gains tax.  That will allow us to keep all the profit and buy into something bigger.

Our house was worth about $187,000 and we owed $147,000 on it.  Closing costs was about $3500 which we wrapped back into the loan.

I have a great contact that there that I can pass on to your if you are interested or if you have any other questions about it.  Send me a message, I would love to help anyway I can!

Shaun Weekes · Answer

You will need to contact the MI company that insured your loan.  Find out what their criteria is.

Typically they require an appraisal ordered through the bank that shows you have passed the 20% threshold and that you've had the loan for a certain amount of time.

Read over your loan docs and or contact your loan officer for help.

Charlie Fitzgerald · Answer

I think if you do the math and factor the costs of refinancing to save $80 a month, you will see that you are going to spend more in fees per year for the costs to refinance than you are going to save by not having the PMI.  The PMI DID do something for you.  It saved you from bringing in additional down payment at the time of acquisition.  Instead of looking at PMI as a waste of money, consider it borrowed down payment money at a ridiculously low rate.  If your plan is to maintain this home as a primary residence for a few years and then convert it to a rental portfolio asset, leave it alone!  If anything, refinance it when you depart to pull your appreciation out then, to use for the acquisition of additional rental assets.  Pay down the principal over the years that you intend to live in it so that when you leave it, the PMI will have been removed anyway.  Your PMI is costing you $960 a year.  Your refinance costs will be atleast 3-4 times that at a minimum.

Do the math.  There is no benefit here.

Lynn McGeein · Answer

The mortgage docs you received at closing should provide some information on how to remove the PMI early as sometimes there are restrictions, like minimum number of years before requesting removal based on new appraisal versus purchase price of home.

Mike Hanneman · Answer

As long as your new appraisial meets the banks guidlines then yes PMI will be taken off. You need to mask and check with your preferred lender as some banks can require more equity then the standard 20%.

Remember you'll have to pay closing costs on the loan so figure that in to your numbers or pay it out of pocket.

Removing PMI is a smart decision it's money that does nothing for you. All though your's is not that much, I have seen alot higher from other people here.