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Profile picture for scbrown22

When to ask for PMI removal

It will be two years in December since my wife and I purchased our first home.  I need some advice on when and how to go about having PMI removed from our monthly mortgage payment.  Any thoughts?
  • April 04 2011 - Laurel
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Answers (17)

As soon as you know that you have at least 20% equity in the property you should be able to get out of your PMI.  Just make sure that's the case, because your lender will charge you for an appraisal.

  • April 04 2011
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Profile picture for Connie Klemme

double check with a lender (or maybe one will post) but if it is FHA  you have to meet both 20% of the purchase paid off AND 5 years of the note.  If it's conventional you simply have to paid off 20%  - that's how I understand it.  If I'm wrong I'm sure someone will correct me.  I hate PMI too...good luck to you!

  • April 04 2011
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Profile picture for sandsnluv
they will only remove the PMI when the mortgage has been paid down enough that you only owe 80% of what the house is worth or less. with the PMI removal you will most likely have to have another appraisal done at the expense of YOU. make sure you think you are really going to be able to do it before you pay all that money just to be turned down and told to try again in another year when you have paid more on the principle and will have to have yet ANOTHER apraisal.
  • April 04 2011
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When you loan balance is 78% of the value of the property.

Happy funding, Rudi
  • April 04 2011
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First step is to contact a Real Estate Agent for a CMA to see if the home has appreciated in value.  You will need at least a 20% equity value in the home and some loans require more.
Your loan is the determinng factor.  Some loans will allow you to do away with PMI if the contributed equity in the home reaches 20% or higher.  some will allow you to have it appraised and then request the PMI removal if the equity value is over 20%.
The best answer is to see First step above.  Work with a good Real Estate Agent or with a good loan officer to get this looked at.  Return to the Real Estate Agent you bought home from and ask them for help.  The review of this situation should quick and easy.  They will need  to see your loan docs to see what the requirements are.  They can then do a CMA to see if you have the needed equity.  Then you would go to lender and ask if they will accept the CMA and if not have it appraised and the trud equity value determined.  This would have to comply with the lenders written requirements that should be in your original loan paperwork.
  • April 04 2011
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Read your mortgage note as it will tell you the benchmark to reach, probably 78%. It is highly doubtful your home appreciated since you purchased but if you bought a bank owned property and know you had over 22% equity when you bought, then in that case most lenders require MI to stay on for 18-24 months. That should also be spelled out in your paperwork. If it happens to be FHA then the new appraised value has nothing to do with it, you have to pay the loan down to a 78% LTV which will take about 10 years if originally 3.5% down payment and no extra payments.  
  • April 04 2011
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If you purchased using a 30 Yr Fixed, look at the 20 Year current rate, add about $5k to your loan balance and calculate a 20 Yr P & I payment. Then compare that to your current P & I payment plus the MI payment, since you can always refinance out of MI if 20% equity. 
  • April 04 2011
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Rudi is correct, it is know at the "Rule of 78" read the papers that you brought home from the title company and this will give you some insight into the process. This also works as good reading material when you have difficulting in sleeping. 
  • April 04 2011
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Profile picture for kristisar
Can someone clarify on the FHA loan? I overpay most months and intended to get rid of the PMI before I was in the house for 5 years. I asked if that was possible when getting the loan and was told yes- was I misinformed?
  • April 04 2011
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For Mortgage terms greater than 15 years:

FHA loans closed on or after January 1st, 2001, FHA's mortgage insurance premium is automatically cancelled when the LTV (loan to value) ratio reaches 78% provide the borrower has paid the premium for at least the last five years.

*Cancellation is normally based on the scheduled amortization of the loan.  However in cases where the loan payments have been accelerated or modified, cancellation can be based on the actual amortization of the loan as provided to FHA by the servicing lender. 

FHA determines when a borrower has reached the 78% LTV ratio based on the lesser of the:
* Sales price, or
* Appraised value at origination (new appraised value will not be considered).

Example:  If the lesser of the sales price or appraised value at origination is $100,000, when the loan amount reaches $78,000 FHA no longer collects the mortgage insurance premium.
  • April 04 2011
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When you do ask for PMI removal, make sure you know what the source is for the value they arrive at. Some banks ask appraisers, others ask agents (not really legal for agents to do BPOs on this type of thing in most states), or zestimates. Knowing what the source is will make it much easier to dispute should the value come in too low. This isn't to say it will be wrong, but do a little homework and it can help you should the value come in lower than what was expected.
  • April 04 2011
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kristisar, you were misinformed. Did you buy with a 30 Yr and 3.5% down payment?
  • April 04 2011
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Profile picture for kristisar
thank you Randy!
  • April 04 2011
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Profile picture for kristisar

Yes Clay, 30 yr fixed FHA with 3.5% down. So I guess, for me, I should strive to pay it down to 78% in 5 years, rather than the 3 years I was thinking. I dont like the idea of having to pay PMI unnecessarily, Id rather keep my money in the bank earning interest. Ill still overpay, just not as much

  • April 04 2011
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kristisar, in order to get the MMI removed in 5 Years you would have to prepay an extra 3.5 payments per year. Paying an extra 5 payments would remove at 4 years and 3 years would take 7 extra/year. That is based on a rate of 5.5%. 
  • April 06 2011
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Sorry, was calculating based on 1% UFMIP / .90 MMI. If your loan had 2.25% UFMIP and .50 MMI. then it will take 4 extra payments per year for 5 year drop off and 9 extra payments per year to drop off at 3 Years.
  • April 06 2011
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Profile picture for scbrown22
Thanks everyone for your insight on this subject matter.  Hopefully I can have this removed at the end of this year.  If I have any other questions I know that I can rely on you guys and girls. 

Sean C. Brown
  • April 26 2011
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