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Profile picture for mdreyaz

Renovated an old home we just bought with 5% down. Can i call the bank to cancel my PMI?

We just bought a $150K home (closed on 11/22) with 5% down. After closing, we spent close to $40K on renovations. Can I call my bank to re-appraise it and get rid of the PMI?

Thanks
  • January 07 2014 - Marietta
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Answers (14)

Profile picture for joleesays
I tried to do this. My lender (citizens) sent me a letter saying that even with a new appraisal, PMI would not be removed until 5 years was up or my loan was paid down under the 75%. That would mean I would have to spend around ten thousand in cash just to remove the PMI.
  • January 29 2014
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Yes.  Assuming this is an agency loan (conventional-conforming) and has already been sold to the agency (Fannie or Freddie), and still your primary residence, the LTV will need to be <75% and all payments will have had to have been made on time. Be prepared to document the improvements.
  • January 18 2014
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I think it is up to the beneficiary of the policy, which is the mortgagee. I'm almost certain the servicer makes the decision for the mortgagee. The PMI company isn't even involved. These days they wish every policy they've ever written would be cancelled, immediately.
  • January 18 2014
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Profile picture for pvhomes
Get an MAI appraisal. If over 20% equity send to PMI Co and Bank.
  • January 18 2014
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Many working pieces here, but first step would be to call the MI company associated with your loan as they would be the one to make the decision and not your bank. They usually have their guidelines in their paperwork and chances are they will require a 12 month waiting period before going off new appraised value. However, since you put such a substantial amount of money into the home you may have a shot at it. I seriously doubt paying all the money to refinance would be less than having to suffer through however many more MI payments you have to reach 12 months. Definitely would be interested to hear what your MI company has to say.
  • January 18 2014
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If you have an FHA that closed after June 3, 2013 and you put down less than 10%, you will have monthly mortgage insurance for the life of the loan. This is a big change that went into effect last year!

If you have a conventional loan, you fall under the Federal Homeowners Protection Act (HPA) of 1998. Fannie and Freddie have guidelines plus also it depends upon the mortgage insurance company used, your mortgage servicer and your state. You should have received a disclosure during your application process and again at closing explain how your insurance was calculated and how it may be canceled.

Our savings and loan uses two mortgage insurance companies. One's policy is as follows: Canceling using current value requires the loan be seasoned for two years, that there is an acceptable payment history, and that the LTV based on the appraisal (at the cost of the borrower) is 75% or lower if the loan is less than five years old.

The company currently servicing your mortgage is the only one that can tell you for sure what your requirements are, but in my opinion you probably won't have much luck cancelling your mortgage insurance at this point.
  • January 07 2014
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It is questionable that spending $40K in renovations added $40K to appraised value. I also doubt if lender would allow MI to be cancelled in less than 12 months. The good news is that it will only take a call to your lender's loan servicing dept to find out the options. If they allow it be aware that an appraisal will need to be done. Before you spend the money, I would check with your Agent to see if there are acceptable comparable sales for the appraiser to justify a $180K valuation.
  • January 07 2014
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To answer a question posed below, the MI company's opinion of value matters because they are ultimately the ones who will decide to terminate the policy or not. 

Beyond that, I've seen a couple of folks post that you should refinance out of that loan.  That probably won't work either as all lenders I am aware of have a sixth month "seasoning" requirement before they're able to use the new appraised value. They, too, will see that your home sold recently and will wonder why there's such a jump in value.  

  • January 07 2014
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Profile picture for user87796347
If you purchased the home with an FHA loan, with the new laws that went into affect last year, I believe that you have to keep the PMI for the first 11 years. You can refinance conventional and rid yourself of it though.
  • January 07 2014
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Profile picture for wetdawgs
Please be aware that renovation costs of 26% of the purchase price don't necessarily add 15% to the home value.   

  • January 07 2014
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Profile picture for My2cent$
Why would the mi companies opinion of value matter? Key word almost!
  • January 07 2014
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It's worth the call for sure and if the answer is no, then definitely look at refinancing into a new loan to save yourself the $$ monthly. Best of success!
  • January 07 2014
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Profile picture for shapiroamg

Yes.  Definitely call, discuss the improvements made and ask if PMI could be cancelled immediately.  If they hem/haw a little, you can always tell them your next call will be to a mortgage person to refinance.

  • January 07 2014
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Hello dmreyaz,

The information I am providing below is from memory and may be wrong, but that's almost never the case.  

The earliest you'll be able to request to have the home re-appraised for mortgage insurance (MI) cancellation is going to be after 12 full months in the property.  Most MI companies will not consider a new value until after a full calendar year has passed.  The short version of the logic behind this is that something's value is determined by what someone is willing to pay.  In your case, your home was worth $150,000 and they're going to hold you to that until the year is up.  It's worth giving them a call to confirm, but this is probably dead on. 

Hope this helps!


Thanks,
Aaron
  • January 07 2014
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