Getting rid of PMI on your mortgage

[kellia]

We bought our house almost 14 years ago. We bought a fixer-upper, so we only put down 5% because we needed the extra money to fix it up. Because we didn't put down 20%, we had to pay PMI. No problem, we thought, we'd just fix it up and refinance. Then, the housing market crashed and our house decreased in value even though we fixed it up.

Now- can't we rid of PMI? I contacted the mortgage company and they said we can't, ever. That doesn't seem right. We've paid it for almost 14 years, we've paid down our house by over 20% of the original value and we have at least 20% equity going by sale values now. I thought those were the criteria they looked at. The bank said things changed and we can't ever get rid of it. We have an FHA loan, if that matters.

Any help would be appreciated, thanks!

 

[QueenIsabella]

I won't be much help, except to tell you that yes, things have changed. On our first house, we did as you did. After a few years of prepaying on our mortgage, we were able to get rid of PMI fairly easily. We also did this with house #3, purchased in 2008. IIRC, we did an entire refinance (to put more money down) in 2012. I specifically remember that the rules had changed by that point. Then when we bought our current house last year, we knocked ourselves out to put down 20% so it wouldn't be an issue (we lost money selling our last house).

So, I suspect the only way to ditch it at this point is to do a total refi. Which is a bummer, because PMI is a waste of money, IMHO. After the big real estate crash, they changed the requirements. On the good side, if you do decide to go the refi route, interest rates are still really low--I think we're paying 4% or something (don't remember exactly).

 

[elgerber]

Mortgage insurance on an FHA is different than PMI on a conventional loan.
Here are the rules on FHA insurance, you would have to check the dates, but it sounds like you would fall into the category where it could be cancelled if you are at 78% of your initial purchase price...

http://www.mtgprofessor.com/A - PMI/how_do_i_cancel_fha_mtg_ins.htm

 

[dmc6469]

PMI can be canceled
Your lender must automatically cancel PMI when your outstanding loan balance drops to 78% of the home's original value. This probably will take several years.

You can speed up the cancellation of mortgage insurance by keeping track of your payments. Once the loan balance reaches 80% of the home's original value, you may ask the lender to discontinue the mortgage insurance premiums.

To put it another way: You can request cancellation of mortgage insurance when the loan-to-value ratio drops to 80%. The lender is required to cancel private mortgage insurance when the loan-to-value ratio drops to 78%.



Read more: http://www.bankrate.com/finance/mor...ate-mortgage-insurance-pmi.aspx#ixzz4Lklrwx4c

 

[LJSquishy]

Yes, you can. FHA requirements have changed in the last few years where PMI on FHA loans is now permanent for the life of the loan but your purchase does not fall within that timevperiod so you can still cancel it.

 

[kellia]

Thanks so much for all of the replies! I forgot to add, we did refinance about 4 years ago. Do you think that would make a difference? Would the 78% be of our original purchase price or the amount we refinanced? I wonder if that is why they said it. When we refinanced, the mortgage guy said they should take it off, but then it didn't happen. I am ashamed to admit I didn't follow through... Our current rate is 2.5%, so I really don't want to refinance again.

 

[elgerber]

Thanks so much for all of the replies! I forgot to add, we did refinance about 4 years ago. Do you think that would make a difference? Would the 78% be of our original purchase price or the amount we refinanced? I wonder if that is why they said it. When we refinanced, the mortgage guy said they should take it off, but then it didn't happen. I am ashamed to admit I didn't follow through... Our current rate is 2.5%, so I really don't want to refinance again.

Did you refinance into an FHA again?

 

[Shelly F - Ohio]

Yes once you hit the 79% of the loan balance the PMI has to cancel. If they don't cancel see about refi the loan. Rates are as low as 1.99% at our bank.

 

[kellia]

Did you refinance into an FHA again?

yes, still FHA. They had the lowest rate.

 

[Party.Of.4-NY>>>FL]

Just wanted to ask a follow up question. How/when is the most recent value of the property determined? If I wanted to investigate dropping PMI, would I have to pay for an appraisal only to be told my home value falls a little under the required threshold to drop PMI? Or do they just use comps. in the same area/neighborhood do determine current market value?
Thanks

 

[Shelly F - Ohio]

NO PMI 80/20 value is based on the loan amt at the origination of the loan. No reappraisal. Now if you want, you can look the current value up on your County Auditor web page.

 

[Party.Of.4-NY>>>FL]

NO PMI 80/20 value is based on the loan amt at the origination of the loan. No reappraisal. Now if you want, you can look the current value up on your County Auditor web page.

Ok got it. That makes sense and certainly simplifies things. Thanks much!!

 

[Ngwira]

We bought our house almost 14 years ago. We bought a fixer-upper, so we only put down 5% because we needed the extra money to fix it up. Because we didn't put down 20%, we had to pay PMI. No problem, we thought, we'd just fix it up and refinance. Then, the housing market crashed and our house decreased in value even though we fixed it up.

Now- can't we rid of PMI? I contacted the mortgage company and they said we can't, ever. That doesn't seem right. We've paid it for almost 14 years, we've paid down our house by over 20% of the original value and we have at least 20% equity going by sale values now. I thought those were the criteria they looked at. The bank said things changed and we can't ever get rid of it. We have an FHA loan, if that matters.

Any help would be appreciated, thanks!

We purchased 3 years ago (2013) and were told that PMI can never be dropped as we went FHA also. You would have to refinance into a conventional loan in order to drop PMI.

 

[CalDisneyMomof2]

We purchased 3 years ago (2013) and were told that PMI can never be dropped as we went FHA also. You would have to refinance into a conventional loan in order to drop PMI.

The rules changed right around the time you purchased. We purchased in December of 2012 and ours will automatically fall off at 78% or at request at 80%. Stinks because we are at about 63% as far as value goes. We just got our house appraised to refinance but due to change in compensation (not the amount, but the structure) underwriters won't approve. We are throwing $450 a month away.

 

[smadath]

We purchased 3 years ago (2013) and were told that PMI can never be dropped as we went FHA also. You would have to refinance into a conventional loan in order to drop PMI.

That rule took effect June, 2013. For loans prior to that, it drops at 80%. And I believe (not positive) the request must be made in writing.

 

[CalDisneyMomof2]

That rule took effect June, 2013. For loans prior to that, it drops at 80%. And I believe (not positive) the request must be made in writing.

I believe it needs to be in writing at 80% or will automatically fall off at 78%.

 

[Princess Minnie321]

Do you have the paperwork from when you refinanced? There should be a section about the PMI and when it would end.

I bought when the market was up and was underwater for a long time after the crash. We refinanced in 2012 and had to pay $167/ month PMI. I also looked into an FHA at this time and was told the payment was like $495 for 5 years and could not be removed sooner. My mortgage papers on the loan we went with said that the PMI would be eliminated when we reached 80% loan to value or in March 2017. I was able to have it removed last winter since we hit the 80%. I called the mortgage company and they gave me their response about a week later. I did not need an appraisal.

Good luck. Hopefully you can get it removed. If not, and if your PMI is high, you may be better off refinancing to a conventional mortgage with a higher rate, but no PMI. I believe the rates are still pretty low right now.