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Need Help With a Question About PMI

We refinanced our mortgage less than a year ago and got a 30 year fixed at 3.25%

It was a $631,000 loan. However, we are being charged about $600/month in PMI insurance each month because we did not have 20% equity at the time of refinancing.

Now, our home has appreciated to about $775k bringing us close to 20% equity.  However, our lender informed us that they will not consider a new appraisal until we have paid 60 months of PMI.

I want to know if this is legal.  We are in California, and have good credit.

Thanks.
  • June 14 2013 - San Ramon
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Answers (7)

This was posted a while back, hope you got what you need.  Truth is I think they are trying to discourage you from refinancing with someone else.  You can in fact refinance today with a new appraisal and get out of the PMI if you have the value.  Happy to discuss further if you have questions I believe I can help you, especially in your area where you have rapid appreciation.
  • July 09 2013
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Rates are considerably higher today, and may not be possible to improve on your situation.  You are currently paying 3.25% plus 1.20 or 1.25% MMI.  You would have to get a new conventional loan below 4.5% to equal where you are currently. You would also incur $3-4K in closing cost so as Justin mentions the length of time you own the property comes into play. 
I would recommend you contact Justin thru his profile and get a quote today without MI and with MI and compare #s.
  • July 09 2013
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Yes that is correct they do want to collect 60 months before allowing you to order the new appraisal.  You can look into refinancing into a Conventional loan with Lender paid MI where they don't charge you PMI but the current rates are not that great compared to your 3.25% interest rate that you have now but you should be able to save money monthly with LPMI but your rate will be higher.  You don't need to have 20% equity to do this with 5% equity you can eliminate the PMI.  I suggest you have a local lender/broker check this option for you.  I hope this helps.  Sorry we only do TX but this should resolve that issue that your having.

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  • July 09 2013
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This must be an FHA loan and the 60 months of insurance would have been disclosed to you at closing (possibly longer insurance depending on the appraised value at the time).   If so, even after 60 months, reappraisal is not an option to remove the insurance, you must reach 78% of initial appraisal AND have paid 60 months.

I agree with the others you should consider refinancing into conventional, and if you do you will sacrifice by paying a higher interest rate in exchange for removing the insurance.   If you go this route, your maximum loan amount would be 625,500, and you would need to appraise at 782,000 to obtain a new loan without insurance.

Depending on how long you plan to stay in the house, and also how long your current MI will be scheduled to remain, it can be determined short term vs long term if advantagous to give up the 3.25% rate in exchange for potential MI removal.
  • June 14 2013
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I agree with Greg and Brian. Even if rates are higher than the 3.25%...the new higher rate may still have a lower payment than your current payment combined with MI.
  • June 14 2013
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It sounds like you have a conventional loan if the lender will ever consider a new appraisal for removing mortgage insurance. 

However it sounds like you have an FHA loan if you got a $631,000 loan with a 3,25% interest rate and they would be willing to possibly remove the MI after 60 payments. $631,000 is over even the super conforming loan limit in high cost areas in California. And I don't think there has ever been a super conforming 30 year fixed as low as 3.25% that I know of (not without tens of thousands of dollars in points). 

I'm pretty sure you have an FHA loan but do you know which one you have? The answer to your question is vastly different between the two. 

Sincerely,
Greg
  • June 14 2013
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Profile picture for Brian GFL Capital
you are probably better off refinancing again into a new 30 year fixed to remove the PMI. the drawback to that is rates are higher than the 3.25% you have now.

usually the PMI is subject to at least 2 years before it will fall off regardless if you have 80% LTV or not.
  • June 14 2013
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