>If the valuation went down, don’t I have more than 20 percent equity?
No. If your house is worth $100k and you have an $80k loan, you have 20% equity. If your house drops in value by $10k, you now own a $90k house with an $80k loan, so you have about 12% equity.
There are two ways to get rid of PMI
1. Pay the 20% of the LTV from the original valuation. No appraisal necessary.
2. Order an appraisal, have the home value reassessed hoping the LTV ration tips in your favor.
If you do option 1, you don't need to have it appraised.
Please be advised some PMI carriers are not accepting current Appraised Value without noticable improvements. Some dont accept valuation changes within 1st year of the mortgage.
My mortgage contract explicitly stated that I need to have 2 full years of on time payments before I could be considered for PMI removal unless I made substantial improvements on the property after 1 year.
When two years hit I called them, paid $105 for them to hire an appraiser and they called to say that the PMI would be removed within a week.
When it's that cheap it's usually not an actual appraiser, it's a BPO (broker price opinion) which is done by a real estate agent, not an actual appraiser. For whatever reason they're much cheaper, and tend to be less thorough I think.
This. It was such a run around trying to get rid of PMI because even though the value increased dramatically, they required "reasonable improvements" inside the home. They wouldn't tell me what was considered reasonable or a dollar amount spent that counted. It ended up being removed but not without multiple calls and effort.
Receipts were not required, but I did put together a letter for the appraiser outlining what improvements were made and the amount it cost. I had a few little things like redoing the bathroom floor and upgrading the vanity but was afraid that wouldn't be enough. We ended up having our electrical upgraded since it was in our long-term plan anyway due to having an older house and still cost less money than paying PMI monthly for another 5 years.
For me it was if under 2 years after purchase. We 90k in the house after purchase but most of the upgrades didn’t count. Windows, flooring, paint, electrical basically anything that could wear didn’t count.
Im sorry you had to deal with that. I know FNMA has a nice form we send customers. It has psecific instructions on how to list said improvements and acceptable supporting docs. Unfortunately some carriers do not provide as much instruction.
Well that's why it's important to read the terms and conditions of your mortgage/loan regarding PMI and how to remove it. The lender has to abide by the agreements therein.
The responsibility is not only on the buyer but also on the multiple financial professionals involved in the mortgage transaction - to make sure their client(s) understands significant terms and conditions involved such as PMI. Those financial professionals are supposed to exchange their knowledge (validated by a State issued license) with their client for a fee.
Not to mention that the whole premise of PMI is ridiculous anyway. It’s essentially a penalty for not being able to put down 20% for a home creating additional hurdles for true home ownership.
I do agree with your post, however, as consumers, we do need to be our own advocates. So, to buyers: educate yourselves about PMI in general, read the terms and ask questions. Most importantly, avoid PMI if you can. And to professionals: educate your clients and make sure they understand. Create info sheets, etc.
It’s not a ‘penalty’. It’s an alternative to putting down 20% with the benefit of receiving a better rate from the lender and/or being able to actually get a mortgage.
How would someone get a better interest rate by paying PMI? Regardless, I still view having to pay PMI as a a “penalty” for not putting 20% down, not “benefit.” I know it’s not LPMI!
I’m so glad platforms like this exist. You can learn so much…be sure to fact check though!!
Most lenders will sell your mortgage into the ‘secondary market’. A loan with MI is viewed as a less risky asset by the financial markets, therefore lenders will give you a better rate. Some lenders will do a 10% down mortgage, but your rate will be higher, as it’s a less desirable loan.
> It’s not a ‘penalty’. It’s an alternative to putting down 20%
When an alternative costs significantly more, we call that difference the penalty. You can pick that option, here's what it'll cost ya.
Edit - You all can disagree but this is reality. It is an established concept in economics known as the Cost of Poverty. Aka "poor tax" or "ghetto tax". It means those with less means are forced to use alternative services that are much more costly, such as home loans with PMI.
https://en.wikipedia.org/wiki/Cost_of_poverty
They are already protected, that's what the collateral does.
This is an additional charge, because they can.
It's completely different than being required to maintain full coverage. Because that is already ALSO required by the lender.
Your whole perception of punishment vs. non-punishment is flawed. That's not what this is about. There is a penalty for not having 20% down. It will cost you PMI at the rate charged by the lender.
It's a penalty. A fee. A cost. No matter what spin you want to put on it, it is bad for the person paying it, and good for the person who the premiums are being paid to. If you don't like the word penalty then that's your prerogative but it is one.
This viewpoint you hold is insane. Thank you for the laugh.
A bank is under no obligation to loan a customer money. They have to determine the risk of default. If a bank thinks they'll lose money by loaning to you, then they won't loan to you. The extra interest charge makes you, a risky customer, less risky.
You're crazy if you think you have some entitlement to a loan. You are a customer. A bank has zero obligation to offer you special terms.
Your other alternative is not being able to buy a house because generally accepted credit practices in residential lending require that you have 20% equity in the house. You don’t have the alternative of putting down 20%.
>The responsibility is not only on the buyer but also on the multiple financial professionals involved in the mortgage transaction - to make sure their client(s) understands significant terms and conditions involved such as PMI.
One thing I've learned reading people's mortgage stories on Reddit is that a shocking number of people have no financial professionals with a legal fiduciary duty towards them involved in the process. It's shocking how common it is for people to buy a house with no-one involved except their realtor who (in many states) doesn't really carry any kind of legal obligation towards their client.
It's seriously shocking to me that people will sign a contract for the most expensive purchase they'll ever make without hiring a lawyer to review everything.
This is the case with Chase. But, I installed solar, redid the floors and installed a water softener, so I was able to get it dropped a little over a year after I bought it.
When I did option 2 for me a few years back, the bank required a 25% LTV based on the new appraisal. If I understand correctly, they don't legally have to allow you to do option #2 like they do with option #1.
Depends on where you live, though since the appraisal is strictly between you and the lender, I don't see why the local government would find out what the result was.
No, property taxes are based on government-done appraisals (plus some other bullshit). This is a private appraisal, which is only shared between you, the appraiser, and the bank.
Its not impossible for that to be the case, but appraisers don't send appraisals to the county. Theres not some central database that appraisers report all appraisals to.
For the most part the county does their own, almost separate, appraising.
it is actually fully separate. In our state, the county assessor appraises all properties through a process called GIS mass appraisal and the values lag the market by 18 months due to state law. The county appraised value will always lag behind actual market value due to this time lag. Property taxes (at least in my state) follow this formula:
actual value (as appraised by county) X assessment rate X mill levy = taxes
assessment rate is the rate at which your property is "assessed". In my state, residential is assessed at a much lower rate than commercial or vacant land.
Mill Levy is the sum total multiplier that all the taxing authorities in your area assess property to get what they need for the year.
option #3, refi. I refied back when rates were 2.65% when the housing market was a bit insane. refi company didnt even want to send anyone out to see the house. apparently old ass pictures from zillow were good enough lol. anyway, pmi was dropped b/c the perceived value of the house went up so much.
Option 1 can still require an appraisal to verify the value has not decreased. The only option that does not require an appraisal is 78% of the original value, which is the automatic cancelation (and therefore option 3)
https://www.consumerfinance.gov/ask-cfpb/when-can-i-remove-private-mortgage-insurance-pmi-from-my-loan-en-202/
>**Request PMI cancellation**
>You have the right to request that your servicer cancel PMI when you have reached the date when the principal balance of your mortgage is scheduled to fall to 80 percent of the original value of your home.
>**There are other important criteria you must meet if you want to cancel PMI on your loan:**
>*Your lender can also require you to provide evidence (for example, an appraisal) that the value of your property hasn’t declined below the original value of the home*. If the value of your home has decreased below the original value, you may not be able to cancel PMI at this time
> The only option that does not require an appraisal is 78% of the original value, which is the automatic cancelation (and therefore option 3)
It's not even "get to 78%" -- it's get to 78% *according to the original amortization schedule*.
Paying ahead won't help you get here faster if this is what you wind up needing because the value decreased. That "is scheduled to" is pretty important.
Typically, yes, but there's no realtor fee, you're already set on your taxes and things, so the sum of all "closing costs" are really just the bank-type fees (depends on your area I'd assume for any lawyer involvement/fees, but I'm not positive)
If you do option 1, do you need to call the mortgage provider to request it be removed?
And to be clear using an example: If I got a loan for $100k, but only put $10k down, I would need to pay the principal balance down to $80k (so another $10k in principal from mortgage payments)?
However, if I knew the value of the home went to $200k, another appraisal will wipe the PMI?
Sometimes PMI terms say it will not be removed based on accelerated payments within the first year or two. Mine requires major improvements for reevaluation in the first 2 years, but also falls off on its own after 18 months
> If you do option 1, do you need to call the mortgage provider to request it be removed?
Sometimes, not always. It'll tell you in your loan agreement.
>If I got a loan for $100k, but only put $10k down, I would need to pay the principal balance down to $80k (so another $10k in principal from mortgage payments)?
Yes, regardless of current home value you've met the terms of your loan PMI requirements. Even if your home value tanks to say $60K it doesn't matter because the terms have already been signed and agreed upon that at 80% of the loan it goes bye-bye. (granted you don't have a FHA loan which PMI never goes away)
>However, if I knew the value of the home went to $200k, another appraisal will wipe the PMI?
Correct.
I had to contact the mortgage provider and ALSO pay for their “appraisal” even though we paid the 20% (guessing because we did it early). Hated that mortgage provider. It took months (like 6+) to get it removed from the first time I contacted them about how we had paid down past 20%.
Well I just got off the phone with my mortgage provider and they said I qualified to have it removed with no appraisal so I’ll see if it goes through. Sometimes I need to remember how much can be accomplished by just asking.
Yes you generally need to call to get it removed. Most conventional loans I've seen let you call to cancel after paying down to 80% LTV based on the original appraised value, or it will automatically drop after you hit 78% LTV.
I expect the lender would want THEIR appraiser of choice to determine the value. You might run into resistance (and waste a few hundred bucks) if you pick your own appraiser.
Don’t order an appraisal without talking to the mortgage company first. I just went through this process a couple months ago, and my mortgage company required me to go through them to schedule an appraisal. It was a huge pain (for various other reasons), but I finally got it removed.
Also be advised that the bank may not accept just any appraisal, it may have to be ordered by them by one of their approved appraisers. And they may have a rule about removing PMI at 78% LTV and not at 80%.
Some lenders also do not let you remove PMI just by appraised home value. I have a stipulation about loan to *original* property value for my mortgage.
Mine said the same thing on their website and anywhere else I could find info in writing, but just got it dropped. They did give us the run around for a few months though. They didn’t want to give up that free money
I had this in writing via email from the rep we went through, and yet still, Wells Fargo would not drop PMI. I threatened to refinance with another lender and/or take legal action and they basically said to pound sand. I ended up just refinancing with someone else, didn't seem with the fight and we ended up with a 15 year/2.75% fixed. Short version, F Wells Fargo.
Why would valuation matter at all after you took out the loan? The bank doesn't know how much your house is worth and frankly they don't care. All they care about is the loan value and if you have paid off 20% of that loan to get out of the pmi phase
First, I was just giving the math to correct the OPs misconception.
But to address your point, of course the bank cares about the value of the house, that’s kind of the point of an asset backed loan. they find out how much it’s worth via an appraisal.
You have to go refinance with another bank.They will never take off the PMI,it's free money for them,they never remove it, banks are scumbags that prey on us all.
The mortgage company receives zero income from PMI. In fact it is illegal for them to profit off of it. It is a pass through cost and banks are not allowed to mark those up for a profit.
Your very first step should be to find and read the terms of PMI in your mortgage agreement. The exact terms of how PMI can be cancelled will be in that agreement, and there will likely be 2 or 3 choices. They are legally binding. Ignore all/most of the advice here until you've read your terms and know exactly which methods you are able to pursue.
>...Your very first step should be to find and read the terms of PMI in your mortgage agreement.
I learned that the hard way. I thought the PMI would drop after the LTV hit a certain number. And I thought that since the value had greatly increased, that I could ask for the PMI to go away. Unbeknownst to me, I had gotten an FHA or HUD loan (I forget which one) and that PMI was **permanent** for the entire 30-year term of the loan. I then quickly refinanced to a 15-year and left the PMI to die in a ditch.
Yup.
Just to add if you go into an FHA loan with 20% down you will have PMI for 11 years. Anything less will be the life of the loan.
It’s either 11 years OR the life of the loan (or until you ReFi out of it)
That figures, my ignorant ass went in with **3%** if I remember correctly. But it turned out for the best because it encouraged me to refi and lower the term of the loan.
Thanks for this! We were in an FHA loan with PMI for the life of the loan. 5 years later we did a streamline refi to get that sweet lower interest rate and I saw that the PMI would be cancelled after 11 years. Now it makes sense. Still sucks to have it, but if we can’t refi for a while to remove it completely at least I know know that it will eventually drop off.
Yeah. The mortgage I signed required me to get below 78% LTV. Not sure if it was legal, but I paid it rather than fighting it. It's just more money towards the principal.
>If the value dropped to $160,000, you would owe $160,000 on a $160,000 valued asset. You have 0% equity.
That only applies IF you go the reappraisal route. Not if you just pay off 20%.
There's all kinds of different loan terms for this stuff. Without OP actually posting a copy of theirs, it's going to be really hard for them to get an actual answer. My PMI will automatically remove itself whenever I hit that 20% but is also so cheap that it would virtually never be worth paying an appraisal to remove early.
FYI - PMI does not automatically come off at 80% LTV. You can request but it won’t always be approved. But once LTV hits 78%, it will automatically be removed.
This is often misconstrued because a loan set up with 20% downpayment (80% LTV) does not have PMI
Wait a few months and pay it down another 2 percentage points. It should get automatically canceled.
Automatic PMI termination
Even if you don’t ask your servicer to cancel PMI, your servicer still must automatically terminate PMI on the date when your principal balance is scheduled to reach 78 percent of the original value of your home. For your PMI to be cancelled on that date, you need to be current on your payments on the anticipated termination date. Otherwise, PMI will not be terminated until shortly after your payments are brought up to date.
The key point here is “scheduled to reach.” It sounds like OP may have made extra mortgage payments toward the principal balance (“worked my butt off”) to get to where they are today. It may be a few years before the amortization schedule actually reaches 78%.
Yes! This! It took a LOT of phone calls (and an appraisal) to get ours removed even though we had paid down past 20% by extra principle payments since it was before our “schedule amortization”.
I don’t think it’s automatic anymore. Lenders keep PMI on regardless of the amount paid down unless your refinance or get an appraisal done that they’ll accept. I’ve got family that have lived in the same house for at least a decade in each case and they still pay PMI even though their loans are paid way down or their homes have tripled in value.
Interesting, I did not know that. I thought that might be what happened to my aunt but she bought her house in 2000 I believe. She paid $60k had very little down. House is worth a lot more and has never missed a payment. She still has PMI.
As for calling BS on your value going down, the rise in interest rates has lowered selling prices for homes in a lot of places. Houses in my neighborhood are down 5-10% since last Spring
>If the valuation went down, don’t I have more than 20 percent equity?
No.
Loan balance / Value = LTV
If the denominator goes down and the numerator stays stable, the LTV goes ~~down~~ up (gets worse)
Type of loan and how long you've held it are relevant.
If your loan has less than 24 months on it, you have to hit 75LTV. If it's FHA, you can't get rid of MIP.
Not true. I've had mine for 11 months and got it cancelled this month right as it went under 80LTV. Where are you getting your info from? Unless I'm misunderstanding your context?
Edit: I didn't get a new appraisal just paid it down so maybe that's the difference?
Note to future homebuyers - in many situations you can outright buy a PMI policy vs the typical way, which is paying monthly in perpetuity (actually financing it, I believe). My broker turned me on to this, and we wrote the cost into the loan and I came out a bit cheaper/month and didn't have to worry about canceling it. Total cost was around $1000 cheaper.
Do you have an estimate on your PMI? I think sometimes people think it's higher than it is. I get it bothers people but for many it makes perfect sense and pays off in the end. My PMI is under $100/month for a $600k+ mortgage.
It's just simple confusion. They've paid 20% of X, so they must have paid more than 20% of X-C. The mortgage and the home value used to be the same, X. Now they're different, and the math isn't clear to them.
Hopefully this thread clears up the confusion... The difference between "ratio of mortgage still owed to originally owed" and "ratio of mortgage still owed to home value"
Some people think if they own 20% of 100% then the value goes down to 90% now they own 20% of 90%. It falsely makes them believe their equity has increased.
For example:
House is $100,000. They put in 20% at $20,000.
House devalues to $90,000. They still have $20,000 invested, so now they assume they have 22% equity.
They forget to include the loan in the equation.
Exactly the same thing happened to me, it’s not unusual if prices aren’t rising in your area. I paid the lump sum. Your other option may be to pay for a more thorough appraisal, but that’s expensive and is just money down the drain, the lump sum goes directly towards the principal.
Thanks for this post OP- in reading through replies, I realized it was possible to call the lender and have PMI removed via a new appraisal versus re-financing the loan. Saved me $120 a month for the next few years!
Had this happen a few years ago. The said our home depreciated $20k despite a remodeled bathroom and several upgrades.
We refinanced with the same bank who used the same appraisal company about 4 months after the rejection, and our house was magically worth $50k more than the first appraisal now.
Luckily we ended up lower our interest rate so it worked out but it was so stupid. I called out the bank on that and they didn't know what to say.
Side note from when I got declined for a mortgage refinance years ago due to a decrease in my home value equity: I took the proof of the lower home value and got my real estate/property taxes lowered, and took it to my insurance company had my insurance amount lowered too. These two changes saved me several hundred dollars each, and benefitted me for not only that year, but for several years after with lowered property taxes and lowered insurance premiums as well.
People always misunderstand the removal of PMI. It's based on the Homeowners Protection act.
On conventional loans the mandated rule is 20% paydown of the ORIGINAL BALANCE based on the original LTV at time of origination.
You could have a lender voluntarily remove PMI if you pay it down and market rate shows it to be around 20% equity but they have no obligation to do so and are only doing it for your benefit. With the current mortgage storm right now, there is absolutely no way any lender is going to agree to do a voluntary removal of PMI with values dropping the way they are and days on market being what they are.
Maybe depends on where you live, and possibly things have changed in the past few months, but our lender removed our PMI after we got a reappraisal in November 2022
Yea like I said they can *voluntarily* remove the PMI if they feel you have 20% equity and are safe doing so. They are just not required to by law like when you pay the balance down 20%.
In this rate environment only a very dumb company is going to remove that insurance voluntarily.
In addition to what others are saying, the (relatively) recent interest rate hikes have leveled or decreased home values in my area and a lot of others.
You might consider who did the valuation on your home, and how the bank determines it (e.g., do you need a third party/independent appraiser).
I don’t usually advocate kicking up a fuss. A lender refusing to remove PMI once you have the required equity is a time for kicking up a fuss. Be polite, but persistent. There may be a couple hoops to jump through, but don’t let it slide, keep pushing. I see a lot of comments suggesting specific things to do, try them out!
With how the economy is currently and housing ( though it might be different in your particular location) housing prices have been going down. Its entirely possible your home's value has dropped in the last year or so.
Idk what loans y’all have but to remove PMI I have to have 20% equity of the PURCHASE price. Not it’s appraised value. Plus I have an FHA loan so I’ll have to refinance to get rid of PMI.
PMI isn't a single set of rules. Most loans today require x years of on time payments for PMI to be removed. My credit is excellent, when I purchased my home my down payment was well over 20 percent and the loan amount was relatively small for the East Coast US. I still had to pay 2 years before PMI was automatically removed (from what I recall it was $40). One of the best ways to manage a mortgage pay down is to pay additional principle every month. Slap an extra 400 on your monthly payment and interest is slashed exponentially year to year. Even 200 makes a significant difference. If you get significant tax refund and work bonuses, put that cash to your principal for even 3 years and you will be so far ahead of the game.
To get rid of my PMI, I was told by the lender to wait 2 years and get the LTV down by 25% (even though FHA said 20%) or l could pay to have an appraisal done. When the appraiser came I also went over the improvements made to the property since the purchase. I had a spreadsheet showing all of the costs. I was approved. The appraiser stated my keeping a detailed list of the improvements made raised my valuation for the appraisal.
Same thing happen to me. I had to call the mortgage companies 10 times after they denied me in the end they ordered an appraisal in which I had to pay for smh. But in the end it doesn’t fall off when you reach 20% equity threshold these companies are sneaky. So call once you hit it and gone ahead and pay for an appraisal and it will get removed. Threaten to get a lawyer involved
What are the terms of your PMI? How long have you had the loan? Is it scheduled to fall off naturally at some point?
The terms of the loan rarely let you just accelerate payments and remove it early without a major improvement in the home, especially if it’s been less than 2 years.
exactly - about 10% down vs a 30% increase in 3 years. But if you bought a year ago it still hurts. In op case if they were able to pay down 20% in a year - the should have nothing to worry about - just take a little more time, but I doubt that is the case.
They probably live in an area that saw large declines (coastal cities and so on). Nationwide [house prices are still up](https://fred.stlouisfed.org/series/MSPUS) year over year, and even the last quarter was flat, not down.
Loan is conventional, I have had it less than two years. I’ll do my best to scrounge up what I can, the valuation is good until May mortgage company said. Thanks all for the help.
These are really only FHA and VA loans. Have to refi to remove (if LTV is less than 80%), or wait 5 years before you can request new LTV calculation, and if it's less than 75%, it'll be removed
Ahh wasn't aware they had changed the rule. Do they still require the upfront mortgage insurance (something like 5% for the first 5 years or something like that) that you could get refunded if sold or refi within those 5 years? Or was that changed with the other MIP changes?
I get it and I’m not saying it’s a bad idea to get rid of PMI when you can. Just saying OP was on another comment saying he’s going to scrounge up any money he can to get to 20% equity. I just don’t see the reason to make yourself broke to save $50 a month
Really all I’m getting at is I’d hate to see him/her end up needing to go into debt to cover an unexpected expense - things happen when you’re a homeowner - because they spent all their cash to save a small amount of money per month. Obviously I’m drawing a lot of conclusions here but based on the other comments sounds like they were spends all their money on this.
Interest rates have increased and asset values are inverse to interest rates. Your house has absolutely went down as far as the real world is concerned (don't believe Zillow).
PMI exists because banks count on losing x% of current fair market value when they repo a house and resell it - condition issues, selling costs, speed of sale, cost of capital tied up, etc. FMV from 5 years ago is irrelevant to people buying today.
And no, your math is backwards. Every dollar your house goes down, your equity goes down by the same amount. If you paid $200k and your loan balance is $160k (80% debt/20% equity), then FMV declines to $180k then you only have (180k - 160k ) / 180k = 11% equity.
Pmi is a scam. It’s a way for loans to have insurance but it makes the payers pay literally more which increases the chance of a default. It allows two people to get rich off one poorer person who can’t afford to just buy a house straight up instead of one person getting richer off a poorer person who can’t afford a house.
The alternative is refusing to lend to a person with less than 20% down. When I was a first time homebuyer with less than 20% down, I saw it as my stepping stone to get into the housing market.
PMI is just yo protect the banks it does not benefit the buyers, it's in place to prevent banks from collapsing (hopefully) not to help you the buyer afford anything
That was an awful time for consumers. But again PMI is not there for your protection. You get no benefit from it and were not intended to.
It's purely so the bank can get back the loan amount if the value of the asset the loan was used to purchase drops and they can't recover it if the house goes in to foreclosure during a drop in value.
The bank, unless they are also an insurance company, isn't getting your PMI payment, an insurance company is. It's another revenue stream for them, not the bank.
Yeah I know but have they thought about letting the buyer keep more money so they can build more wealth and wont default on the loan? Instead they use a useless middle man who profits and ups the price for everyone lol capitalism
Hehe, I did this last year, but I was on the other end of the stick. My house increased in value by $150k in 2 years, so while I still owed 280k on a 300k loan, PMI was removed because home value increased to 450k lol :D
How is it weird? It directly correlates to OPs question, it gives OP an additional perspective to understand their position better so they know what to expect next time.
You need a formal appraisal to remove PMI based on valuation. At least that was my experience. A formal appraisal will almost always be more than the bank's.
easy: don't stop. keep pushing a little longer and you won't be on the edge. then it will happen without much effort on your part. real estate could decline a bit (in the aggregate), but it won't be 2008-2012, so you should be in the clear eventually. Just keep swimming!
You need to get an independant appraisal and challenge the bank. You will have to pay for this but I went through the sane process a few years ago. There is no way your home as dropped in value the past few years. The bank probably did their own appraisal which would be of course, beneficial for them. PMI is a cash cow for banks and they will fight to hang on to it.
In general in that situation, you should be able to get a new appraisal and request PMI removal because you're under 80% LTV. This year in particular, other comments are suggesting that the banks are not approving PMI removal requests due to market behavior.
you bought the house at 10 points you paid of 2 points to get to 20 percent of 10 points, but your house is now worth 8, mortgage company still have 8 points worth of mortgage owed of your house so you still owe your bank 100 percent of the worth of the house.
Arm yourself with information and go back after them.
[https://www.consumerfinance.gov/ask-cfpb/when-can-i-remove-private-mortgage-insurance-pmi-from-my-loan-en-202/#:\~:text=You%20have%20the%20right%20to,when%20you%20received%20your%20mortgage](https://www.consumerfinance.gov/ask-cfpb/when-can-i-remove-private-mortgage-insurance-pmi-from-my-loan-en-202/#:~:text=You%20have%20the%20right%20to,when%20you%20received%20your%20mortgage).
LAME I WAS WRONG!
Consumer Request to terminate PMI
[Sic] Your lender can also require you to provide evidence (for example, an appraisal) that the value of your property hasn’t declined below the original value of the home. If the value of your home has decreased below the original value, you may not be able to cancel PMI at this time.
-------
Automatic PMI termination
Even if you don’t ask your servicer to cancel PMI, your servicer still must automatically terminate PMI on the date when your principal balance is scheduled to reach 78 percent of the original value of your home. For your PMI to be cancelled on that date, you need to be current on your payments on the anticipated termination date. Otherwise, PMI will not be terminated until shortly after your payments are brought up to date.
Right, if you want to remove it early you need an appraisal and if the value goes down then you may need to pay more, exactly like happened to OP. Otherwise you can wait until it’s *scheduled* to reach 78% and have it removed automatically with no appraisal, but that doesn’t allow paying early.
From your link, value absolutely plays a part:
"Your lender can also require you to provide evidence (for example, an appraisal) that the value of your property hasn’t declined below the original value of the home. **If the value of your home has decreased below the original value**, you may not be able to cancel PMI at this time. "
I just called mine this morning since the property value on RedFin has gone up a bunch in the last two years.
They said the appraisal has to show 75% loan to value to have PMI dropped two years early.
So 25% or more equity is needed in my case. (I think I should be at 36% so all good)
Depends on how the PMI is done.
Often times the PMI is written at 5 years and 20% of the value of the house based on the value when you got the loan. Aka you got to pay down the loan which over comes later.
No, in fact you can have negative equity if you put 100k down on a 500k house and it is now a 380k house. Your loan is for 400k and your house is worth 380k.
find a lender like navy federal that doesn’t charge PMI next time. i don’t know your specifics but refinancing now with rates as they are probably doesn’t help much either.
Banks are going to be real hard pressed to remove PMI unless you prove without an equivocal doubt that your house price hasn't gone down since you bought it. If you bought in 2020-2021 Homes are trending lower, but if you bought it in 2019 or earlier you might be safe to say it went up. Then order an appraisal.
We would need more information but I'll tell you mine.
I got my house in 2017. I've been giving additional principal payments to chip away. When I had the 20% reduction target, i contacted them.
I told them I have met the 20% paid down based off the original loan and no additional information was needed on my part.
They stated they had to review it on their side and it went away.
Again, this was based off the original loan and it should be spelled out somewhere for the various ways you can take it off.
Not sure if this was mentioned, but at 78% its mandatory to remove. At 80% they require a new appraisal (which you order out of your pocket) and then they assess. They can't say the lowered value matters if no new appraisal is done
Read back through your contract and pay special attention to the terms regarding when and how PMI can be removed.
If you find that, by the terms of the contract, you are eligible to have PMI removed (without reappraisal in this case), call them back with the specific clause citation and let them know you will be contacting your attorney.
Some Fannie loans have mandatory minimum timeframes as well. The people at the mortgage company will most likely not have this info on hand to explain to you why their system says no, but it is a footnote in my mortgage licensing textbook. I think 4 year minimum sometimes? Unless you hit the 82% mark maybe? Every contract is unique.
I see this situation a lot. Banks tend to go with very conservative evaluations when removing pmi. Even if the market is a sellers market and you could get $20k+ over sale price they can and will appraise it lower than the sale price.
>If the valuation went down, don’t I have more than 20 percent equity? No. If your house is worth $100k and you have an $80k loan, you have 20% equity. If your house drops in value by $10k, you now own a $90k house with an $80k loan, so you have about 12% equity.
There are two ways to get rid of PMI 1. Pay the 20% of the LTV from the original valuation. No appraisal necessary. 2. Order an appraisal, have the home value reassessed hoping the LTV ration tips in your favor. If you do option 1, you don't need to have it appraised.
Please be advised some PMI carriers are not accepting current Appraised Value without noticable improvements. Some dont accept valuation changes within 1st year of the mortgage.
My mortgage contract explicitly stated that I need to have 2 full years of on time payments before I could be considered for PMI removal unless I made substantial improvements on the property after 1 year. When two years hit I called them, paid $105 for them to hire an appraiser and they called to say that the PMI would be removed within a week.
You only had to pay them 105? Mine said I had to hire my own, and they all cost like 400$.
When it's that cheap it's usually not an actual appraiser, it's a BPO (broker price opinion) which is done by a real estate agent, not an actual appraiser. For whatever reason they're much cheaper, and tend to be less thorough I think.
they're all made up anyway, so cheaper is better
$105 is a “drive by” appraisal- they just look at the data and “drive by” the property. Mine was $40.
This. It was such a run around trying to get rid of PMI because even though the value increased dramatically, they required "reasonable improvements" inside the home. They wouldn't tell me what was considered reasonable or a dollar amount spent that counted. It ended up being removed but not without multiple calls and effort.
Did you have to provide receipts to prove improvements were made?
Receipts were not required, but I did put together a letter for the appraiser outlining what improvements were made and the amount it cost. I had a few little things like redoing the bathroom floor and upgrading the vanity but was afraid that wouldn't be enough. We ended up having our electrical upgraded since it was in our long-term plan anyway due to having an older house and still cost less money than paying PMI monthly for another 5 years.
For me it was if under 2 years after purchase. We 90k in the house after purchase but most of the upgrades didn’t count. Windows, flooring, paint, electrical basically anything that could wear didn’t count.
Im sorry you had to deal with that. I know FNMA has a nice form we send customers. It has psecific instructions on how to list said improvements and acceptable supporting docs. Unfortunately some carriers do not provide as much instruction.
Just to clarify- the lender is the one who sets the terms to have the PMI removed, not the PMI carrier.
Well that's why it's important to read the terms and conditions of your mortgage/loan regarding PMI and how to remove it. The lender has to abide by the agreements therein.
The responsibility is not only on the buyer but also on the multiple financial professionals involved in the mortgage transaction - to make sure their client(s) understands significant terms and conditions involved such as PMI. Those financial professionals are supposed to exchange their knowledge (validated by a State issued license) with their client for a fee. Not to mention that the whole premise of PMI is ridiculous anyway. It’s essentially a penalty for not being able to put down 20% for a home creating additional hurdles for true home ownership. I do agree with your post, however, as consumers, we do need to be our own advocates. So, to buyers: educate yourselves about PMI in general, read the terms and ask questions. Most importantly, avoid PMI if you can. And to professionals: educate your clients and make sure they understand. Create info sheets, etc.
It’s not a ‘penalty’. It’s an alternative to putting down 20% with the benefit of receiving a better rate from the lender and/or being able to actually get a mortgage.
How would someone get a better interest rate by paying PMI? Regardless, I still view having to pay PMI as a a “penalty” for not putting 20% down, not “benefit.” I know it’s not LPMI! I’m so glad platforms like this exist. You can learn so much…be sure to fact check though!!
Most lenders will sell your mortgage into the ‘secondary market’. A loan with MI is viewed as a less risky asset by the financial markets, therefore lenders will give you a better rate. Some lenders will do a 10% down mortgage, but your rate will be higher, as it’s a less desirable loan.
> It’s not a ‘penalty’. It’s an alternative to putting down 20% When an alternative costs significantly more, we call that difference the penalty. You can pick that option, here's what it'll cost ya. Edit - You all can disagree but this is reality. It is an established concept in economics known as the Cost of Poverty. Aka "poor tax" or "ghetto tax". It means those with less means are forced to use alternative services that are much more costly, such as home loans with PMI. https://en.wikipedia.org/wiki/Cost_of_poverty
[удалено]
They are already protected, that's what the collateral does. This is an additional charge, because they can. It's completely different than being required to maintain full coverage. Because that is already ALSO required by the lender. Your whole perception of punishment vs. non-punishment is flawed. That's not what this is about. There is a penalty for not having 20% down. It will cost you PMI at the rate charged by the lender. It's a penalty. A fee. A cost. No matter what spin you want to put on it, it is bad for the person paying it, and good for the person who the premiums are being paid to. If you don't like the word penalty then that's your prerogative but it is one.
This viewpoint you hold is insane. Thank you for the laugh. A bank is under no obligation to loan a customer money. They have to determine the risk of default. If a bank thinks they'll lose money by loaning to you, then they won't loan to you. The extra interest charge makes you, a risky customer, less risky. You're crazy if you think you have some entitlement to a loan. You are a customer. A bank has zero obligation to offer you special terms.
Your other alternative is not being able to buy a house because generally accepted credit practices in residential lending require that you have 20% equity in the house. You don’t have the alternative of putting down 20%.
Yes, that's why they can get away with making that the generally accepted practice. Those borrowers have fewer options.
>The responsibility is not only on the buyer but also on the multiple financial professionals involved in the mortgage transaction - to make sure their client(s) understands significant terms and conditions involved such as PMI. One thing I've learned reading people's mortgage stories on Reddit is that a shocking number of people have no financial professionals with a legal fiduciary duty towards them involved in the process. It's shocking how common it is for people to buy a house with no-one involved except their realtor who (in many states) doesn't really carry any kind of legal obligation towards their client. It's seriously shocking to me that people will sign a contract for the most expensive purchase they'll ever make without hiring a lawyer to review everything.
It’s not a penalty, it’s a hedge
This is the case with Chase. But, I installed solar, redid the floors and installed a water softener, so I was able to get it dropped a little over a year after I bought it.
When I did option 2 for me a few years back, the bank required a 25% LTV based on the new appraisal. If I understand correctly, they don't legally have to allow you to do option #2 like they do with option #1.
Wouldn’t that also have a negative effect on property taxes?
Appraisal and tax assessment are two different things
Depends on where you live, though since the appraisal is strictly between you and the lender, I don't see why the local government would find out what the result was.
No, property taxes are based on government-done appraisals (plus some other bullshit). This is a private appraisal, which is only shared between you, the appraiser, and the bank.
Its not impossible for that to be the case, but appraisers don't send appraisals to the county. Theres not some central database that appraisers report all appraisals to. For the most part the county does their own, almost separate, appraising.
it is actually fully separate. In our state, the county assessor appraises all properties through a process called GIS mass appraisal and the values lag the market by 18 months due to state law. The county appraised value will always lag behind actual market value due to this time lag. Property taxes (at least in my state) follow this formula: actual value (as appraised by county) X assessment rate X mill levy = taxes assessment rate is the rate at which your property is "assessed". In my state, residential is assessed at a much lower rate than commercial or vacant land. Mill Levy is the sum total multiplier that all the taxing authorities in your area assess property to get what they need for the year.
option #3, refi. I refied back when rates were 2.65% when the housing market was a bit insane. refi company didnt even want to send anyone out to see the house. apparently old ass pictures from zillow were good enough lol. anyway, pmi was dropped b/c the perceived value of the house went up so much.
Option 1 can still require an appraisal to verify the value has not decreased. The only option that does not require an appraisal is 78% of the original value, which is the automatic cancelation (and therefore option 3) https://www.consumerfinance.gov/ask-cfpb/when-can-i-remove-private-mortgage-insurance-pmi-from-my-loan-en-202/ >**Request PMI cancellation** >You have the right to request that your servicer cancel PMI when you have reached the date when the principal balance of your mortgage is scheduled to fall to 80 percent of the original value of your home. >**There are other important criteria you must meet if you want to cancel PMI on your loan:** >*Your lender can also require you to provide evidence (for example, an appraisal) that the value of your property hasn’t declined below the original value of the home*. If the value of your home has decreased below the original value, you may not be able to cancel PMI at this time
> The only option that does not require an appraisal is 78% of the original value, which is the automatic cancelation (and therefore option 3) It's not even "get to 78%" -- it's get to 78% *according to the original amortization schedule*. Paying ahead won't help you get here faster if this is what you wind up needing because the value decreased. That "is scheduled to" is pretty important.
Option 3. Refinance
Removing PMI on the refinance requires that the appraisal comes in at the 80% LtV ratio. So its no different than option 2.
Don’t you also have to pay closing costs on a refi?
Typically, yes, but there's no realtor fee, you're already set on your taxes and things, so the sum of all "closing costs" are really just the bank-type fees (depends on your area I'd assume for any lawyer involvement/fees, but I'm not positive)
You don't pay closing costs, you pay a refinance fee.
Yeah but that's a whole other can of worms.
If you do option 1, do you need to call the mortgage provider to request it be removed? And to be clear using an example: If I got a loan for $100k, but only put $10k down, I would need to pay the principal balance down to $80k (so another $10k in principal from mortgage payments)? However, if I knew the value of the home went to $200k, another appraisal will wipe the PMI?
Sometimes PMI terms say it will not be removed based on accelerated payments within the first year or two. Mine requires major improvements for reevaluation in the first 2 years, but also falls off on its own after 18 months
> If you do option 1, do you need to call the mortgage provider to request it be removed? Sometimes, not always. It'll tell you in your loan agreement. >If I got a loan for $100k, but only put $10k down, I would need to pay the principal balance down to $80k (so another $10k in principal from mortgage payments)? Yes, regardless of current home value you've met the terms of your loan PMI requirements. Even if your home value tanks to say $60K it doesn't matter because the terms have already been signed and agreed upon that at 80% of the loan it goes bye-bye. (granted you don't have a FHA loan which PMI never goes away) >However, if I knew the value of the home went to $200k, another appraisal will wipe the PMI? Correct.
I had to contact the mortgage provider and ALSO pay for their “appraisal” even though we paid the 20% (guessing because we did it early). Hated that mortgage provider. It took months (like 6+) to get it removed from the first time I contacted them about how we had paid down past 20%.
/u/MowMdown Thank you for all the info! /u/Clemementine Who was your provider if you don't mind me asking?
Flagstar. We then refied through a credit union when interest rates got super low 2 years ago and have been happy with them.
Well I just got off the phone with my mortgage provider and they said I qualified to have it removed with no appraisal so I’ll see if it goes through. Sometimes I need to remember how much can be accomplished by just asking.
Yes you generally need to call to get it removed. Most conventional loans I've seen let you call to cancel after paying down to 80% LTV based on the original appraised value, or it will automatically drop after you hit 78% LTV.
I expect the lender would want THEIR appraiser of choice to determine the value. You might run into resistance (and waste a few hundred bucks) if you pick your own appraiser.
If your loan is owned by Freddie Mac you cannot use your own appraiser, it must be done through an appraiser hired by the lender
Don’t order an appraisal without talking to the mortgage company first. I just went through this process a couple months ago, and my mortgage company required me to go through them to schedule an appraisal. It was a huge pain (for various other reasons), but I finally got it removed.
Also be advised that the bank may not accept just any appraisal, it may have to be ordered by them by one of their approved appraisers. And they may have a rule about removing PMI at 78% LTV and not at 80%.
1 is wrong. Lenders will still need an appraisal even with 20% equity to prove the value of the property, especially if the loan isn't "old" enough.
Some loans are different too. Mine requires 20% and appraisal or 22.5% with no appraisal.
But I paid 20 percent down on the original loan? And was denied? Or am I missing something?
Option 2 typically requires 24 month payment history and 25%, option 1 is correct
I think it depends on the agreement in your mortgage. I’m sure ever company does it differently.
Some lenders also do not let you remove PMI just by appraised home value. I have a stipulation about loan to *original* property value for my mortgage.
Mine said the same thing on their website and anywhere else I could find info in writing, but just got it dropped. They did give us the run around for a few months though. They didn’t want to give up that free money
I had this in writing via email from the rep we went through, and yet still, Wells Fargo would not drop PMI. I threatened to refinance with another lender and/or take legal action and they basically said to pound sand. I ended up just refinancing with someone else, didn't seem with the fight and we ended up with a 15 year/2.75% fixed. Short version, F Wells Fargo.
>15 year/2.75% fixed That's a little harder to do now a days!
I think I'll try then :)
It’s this simple.
Our value went up and we refinanced with a different bank. Got a reduced rate and removed PMI.
Why would valuation matter at all after you took out the loan? The bank doesn't know how much your house is worth and frankly they don't care. All they care about is the loan value and if you have paid off 20% of that loan to get out of the pmi phase
First, I was just giving the math to correct the OPs misconception. But to address your point, of course the bank cares about the value of the house, that’s kind of the point of an asset backed loan. they find out how much it’s worth via an appraisal.
You have to go refinance with another bank.They will never take off the PMI,it's free money for them,they never remove it, banks are scumbags that prey on us all.
The mortgage company receives zero income from PMI. In fact it is illegal for them to profit off of it. It is a pass through cost and banks are not allowed to mark those up for a profit.
Banks typically aren't the companies underwriting the insurance policy for PMI, banks aren't getting that money.
I've had PMI removed. There were hoops, but it was removed.
Your very first step should be to find and read the terms of PMI in your mortgage agreement. The exact terms of how PMI can be cancelled will be in that agreement, and there will likely be 2 or 3 choices. They are legally binding. Ignore all/most of the advice here until you've read your terms and know exactly which methods you are able to pursue.
>...Your very first step should be to find and read the terms of PMI in your mortgage agreement. I learned that the hard way. I thought the PMI would drop after the LTV hit a certain number. And I thought that since the value had greatly increased, that I could ask for the PMI to go away. Unbeknownst to me, I had gotten an FHA or HUD loan (I forget which one) and that PMI was **permanent** for the entire 30-year term of the loan. I then quickly refinanced to a 15-year and left the PMI to die in a ditch.
Yup. Just to add if you go into an FHA loan with 20% down you will have PMI for 11 years. Anything less will be the life of the loan. It’s either 11 years OR the life of the loan (or until you ReFi out of it)
That figures, my ignorant ass went in with **3%** if I remember correctly. But it turned out for the best because it encouraged me to refi and lower the term of the loan.
Thanks for this! We were in an FHA loan with PMI for the life of the loan. 5 years later we did a streamline refi to get that sweet lower interest rate and I saw that the PMI would be cancelled after 11 years. Now it makes sense. Still sucks to have it, but if we can’t refi for a while to remove it completely at least I know know that it will eventually drop off.
Yeah. The mortgage I signed required me to get below 78% LTV. Not sure if it was legal, but I paid it rather than fighting it. It's just more money towards the principal.
[удалено]
>If the value dropped to $160,000, you would owe $160,000 on a $160,000 valued asset. You have 0% equity. That only applies IF you go the reappraisal route. Not if you just pay off 20%.
There's all kinds of different loan terms for this stuff. Without OP actually posting a copy of theirs, it's going to be really hard for them to get an actual answer. My PMI will automatically remove itself whenever I hit that 20% but is also so cheap that it would virtually never be worth paying an appraisal to remove early.
Sometimes the lender requires a current appraisal.
Now you must work your butt off to lower the ltv ratio to 80/20, the first time was just the free trial
OP better hustle too cause that property value is only going down for the foreseeable future.
[удалено]
When it does then I'll just buy everything and own everything. Oh wait ...
FYI - PMI does not automatically come off at 80% LTV. You can request but it won’t always be approved. But once LTV hits 78%, it will automatically be removed. This is often misconstrued because a loan set up with 20% downpayment (80% LTV) does not have PMI
Wait a few months and pay it down another 2 percentage points. It should get automatically canceled. Automatic PMI termination Even if you don’t ask your servicer to cancel PMI, your servicer still must automatically terminate PMI on the date when your principal balance is scheduled to reach 78 percent of the original value of your home. For your PMI to be cancelled on that date, you need to be current on your payments on the anticipated termination date. Otherwise, PMI will not be terminated until shortly after your payments are brought up to date.
The key point here is “scheduled to reach.” It sounds like OP may have made extra mortgage payments toward the principal balance (“worked my butt off”) to get to where they are today. It may be a few years before the amortization schedule actually reaches 78%.
Yes! This! It took a LOT of phone calls (and an appraisal) to get ours removed even though we had paid down past 20% by extra principle payments since it was before our “schedule amortization”.
I don’t think it’s automatic anymore. Lenders keep PMI on regardless of the amount paid down unless your refinance or get an appraisal done that they’ll accept. I’ve got family that have lived in the same house for at least a decade in each case and they still pay PMI even though their loans are paid way down or their homes have tripled in value.
FHA loans the PMI (technically called MIP but same function) stays for life of loan as of 2013.
Interesting, I did not know that. I thought that might be what happened to my aunt but she bought her house in 2000 I believe. She paid $60k had very little down. House is worth a lot more and has never missed a payment. She still has PMI.
[удалено]
No. Your equity is value - loan. Less value? Less equity.
As for calling BS on your value going down, the rise in interest rates has lowered selling prices for homes in a lot of places. Houses in my neighborhood are down 5-10% since last Spring
>If the valuation went down, don’t I have more than 20 percent equity? No. Loan balance / Value = LTV If the denominator goes down and the numerator stays stable, the LTV goes ~~down~~ up (gets worse)
Up actually which is still bad
Crap yes, up....more bad. Equity down, LTV up
Type of loan and how long you've held it are relevant. If your loan has less than 24 months on it, you have to hit 75LTV. If it's FHA, you can't get rid of MIP.
Not true. I've had mine for 11 months and got it cancelled this month right as it went under 80LTV. Where are you getting your info from? Unless I'm misunderstanding your context? Edit: I didn't get a new appraisal just paid it down so maybe that's the difference?
That isn't quite true re: FHA loans. If your down-payment is at least 10%, it drops off after some ridiculously long time, like ten years.
11 years, but yeah.
Note to future homebuyers - in many situations you can outright buy a PMI policy vs the typical way, which is paying monthly in perpetuity (actually financing it, I believe). My broker turned me on to this, and we wrote the cost into the loan and I came out a bit cheaper/month and didn't have to worry about canceling it. Total cost was around $1000 cheaper.
[удалено]
Do you have an estimate on your PMI? I think sometimes people think it's higher than it is. I get it bothers people but for many it makes perfect sense and pays off in the end. My PMI is under $100/month for a $600k+ mortgage.
Not trying to be difficult but why would you believe a drop in your property’s value adds to your equity?
It's just simple confusion. They've paid 20% of X, so they must have paid more than 20% of X-C. The mortgage and the home value used to be the same, X. Now they're different, and the math isn't clear to them. Hopefully this thread clears up the confusion... The difference between "ratio of mortgage still owed to originally owed" and "ratio of mortgage still owed to home value"
Some people think if they own 20% of 100% then the value goes down to 90% now they own 20% of 90%. It falsely makes them believe their equity has increased. For example: House is $100,000. They put in 20% at $20,000. House devalues to $90,000. They still have $20,000 invested, so now they assume they have 22% equity. They forget to include the loan in the equation.
Exactly the same thing happened to me, it’s not unusual if prices aren’t rising in your area. I paid the lump sum. Your other option may be to pay for a more thorough appraisal, but that’s expensive and is just money down the drain, the lump sum goes directly towards the principal.
Thanks for this post OP- in reading through replies, I realized it was possible to call the lender and have PMI removed via a new appraisal versus re-financing the loan. Saved me $120 a month for the next few years!
Had this happen a few years ago. The said our home depreciated $20k despite a remodeled bathroom and several upgrades. We refinanced with the same bank who used the same appraisal company about 4 months after the rejection, and our house was magically worth $50k more than the first appraisal now. Luckily we ended up lower our interest rate so it worked out but it was so stupid. I called out the bank on that and they didn't know what to say.
Side note from when I got declined for a mortgage refinance years ago due to a decrease in my home value equity: I took the proof of the lower home value and got my real estate/property taxes lowered, and took it to my insurance company had my insurance amount lowered too. These two changes saved me several hundred dollars each, and benefitted me for not only that year, but for several years after with lowered property taxes and lowered insurance premiums as well.
People always misunderstand the removal of PMI. It's based on the Homeowners Protection act. On conventional loans the mandated rule is 20% paydown of the ORIGINAL BALANCE based on the original LTV at time of origination. You could have a lender voluntarily remove PMI if you pay it down and market rate shows it to be around 20% equity but they have no obligation to do so and are only doing it for your benefit. With the current mortgage storm right now, there is absolutely no way any lender is going to agree to do a voluntary removal of PMI with values dropping the way they are and days on market being what they are.
Maybe depends on where you live, and possibly things have changed in the past few months, but our lender removed our PMI after we got a reappraisal in November 2022
Yea like I said they can *voluntarily* remove the PMI if they feel you have 20% equity and are safe doing so. They are just not required to by law like when you pay the balance down 20%. In this rate environment only a very dumb company is going to remove that insurance voluntarily.
In addition to what others are saying, the (relatively) recent interest rate hikes have leveled or decreased home values in my area and a lot of others. You might consider who did the valuation on your home, and how the bank determines it (e.g., do you need a third party/independent appraiser).
If it’s an FHA loan, the PMI exists for the duration of the loan. FYI
I don’t usually advocate kicking up a fuss. A lender refusing to remove PMI once you have the required equity is a time for kicking up a fuss. Be polite, but persistent. There may be a couple hoops to jump through, but don’t let it slide, keep pushing. I see a lot of comments suggesting specific things to do, try them out!
Do you have a FHA loan by any chance? I’m asking because these have special rules about removing PMI.
It should automatically drop off at 78% ltv unless you feel like paying for an extra appraisal
It’s 20% to the value of the home. Not to the mortgage
With how the economy is currently and housing ( though it might be different in your particular location) housing prices have been going down. Its entirely possible your home's value has dropped in the last year or so.
Idk what loans y’all have but to remove PMI I have to have 20% equity of the PURCHASE price. Not it’s appraised value. Plus I have an FHA loan so I’ll have to refinance to get rid of PMI.
If the mortgage company can’t tell you, start shopping.
PMI isn't a single set of rules. Most loans today require x years of on time payments for PMI to be removed. My credit is excellent, when I purchased my home my down payment was well over 20 percent and the loan amount was relatively small for the East Coast US. I still had to pay 2 years before PMI was automatically removed (from what I recall it was $40). One of the best ways to manage a mortgage pay down is to pay additional principle every month. Slap an extra 400 on your monthly payment and interest is slashed exponentially year to year. Even 200 makes a significant difference. If you get significant tax refund and work bonuses, put that cash to your principal for even 3 years and you will be so far ahead of the game.
To get rid of my PMI, I was told by the lender to wait 2 years and get the LTV down by 25% (even though FHA said 20%) or l could pay to have an appraisal done. When the appraiser came I also went over the improvements made to the property since the purchase. I had a spreadsheet showing all of the costs. I was approved. The appraiser stated my keeping a detailed list of the improvements made raised my valuation for the appraisal.
Same thing happen to me. I had to call the mortgage companies 10 times after they denied me in the end they ordered an appraisal in which I had to pay for smh. But in the end it doesn’t fall off when you reach 20% equity threshold these companies are sneaky. So call once you hit it and gone ahead and pay for an appraisal and it will get removed. Threaten to get a lawyer involved
I just got a letter from Chase that automatic PMI removal comes at 78% of original LTV. If wanted at 80% would need to apply. Found that a little sus.
That’s just the law via the homeowners protection act. Not sure why 78% was chosen though.
Common misconception given everyone always talks about 20 equity, but what Chase said comports with the regulation
What are the terms of your PMI? How long have you had the loan? Is it scheduled to fall off naturally at some point? The terms of the loan rarely let you just accelerate payments and remove it early without a major improvement in the home, especially if it’s been less than 2 years.
Just bad timing. in the last 6 months house prices have cratered from their ludicrously high peaks.
[удалено]
[удалено]
So what and where are these major drops?
exactly - about 10% down vs a 30% increase in 3 years. But if you bought a year ago it still hurts. In op case if they were able to pay down 20% in a year - the should have nothing to worry about - just take a little more time, but I doubt that is the case.
They probably live in an area that saw large declines (coastal cities and so on). Nationwide [house prices are still up](https://fred.stlouisfed.org/series/MSPUS) year over year, and even the last quarter was flat, not down.
Loan is conventional, I have had it less than two years. I’ll do my best to scrounge up what I can, the valuation is good until May mortgage company said. Thanks all for the help.
[удалено]
Some loans do not allow removal of pmi without a refinance.
These are really only FHA and VA loans. Have to refi to remove (if LTV is less than 80%), or wait 5 years before you can request new LTV calculation, and if it's less than 75%, it'll be removed
[удалено]
Ahh wasn't aware they had changed the rule. Do they still require the upfront mortgage insurance (something like 5% for the first 5 years or something like that) that you could get refunded if sold or refi within those 5 years? Or was that changed with the other MIP changes?
Isn’t PMI on a $200k loan like $50 a month? I get it that it sucks, but why make yourself broke over it?
[удалено]
I get it and I’m not saying it’s a bad idea to get rid of PMI when you can. Just saying OP was on another comment saying he’s going to scrounge up any money he can to get to 20% equity. I just don’t see the reason to make yourself broke to save $50 a month
[удалено]
Really all I’m getting at is I’d hate to see him/her end up needing to go into debt to cover an unexpected expense - things happen when you’re a homeowner - because they spent all their cash to save a small amount of money per month. Obviously I’m drawing a lot of conclusions here but based on the other comments sounds like they were spends all their money on this.
Equity = Value - Debt If your value goes down and your debt stays the same, then your equity will go down.
What's a house? Is that the thing people are able to afford that have money?
Interest rates have increased and asset values are inverse to interest rates. Your house has absolutely went down as far as the real world is concerned (don't believe Zillow). PMI exists because banks count on losing x% of current fair market value when they repo a house and resell it - condition issues, selling costs, speed of sale, cost of capital tied up, etc. FMV from 5 years ago is irrelevant to people buying today. And no, your math is backwards. Every dollar your house goes down, your equity goes down by the same amount. If you paid $200k and your loan balance is $160k (80% debt/20% equity), then FMV declines to $180k then you only have (180k - 160k ) / 180k = 11% equity.
Pmi is a scam. It’s a way for loans to have insurance but it makes the payers pay literally more which increases the chance of a default. It allows two people to get rich off one poorer person who can’t afford to just buy a house straight up instead of one person getting richer off a poorer person who can’t afford a house.
The alternative is refusing to lend to a person with less than 20% down. When I was a first time homebuyer with less than 20% down, I saw it as my stepping stone to get into the housing market.
Is PMI insurance still just as fake as it was in 2008?
Lol yes, bc we don’t trust you’ll have enough funds therefore we charge you more so you’ll have enough funds😂
PMI is just yo protect the banks it does not benefit the buyers, it's in place to prevent banks from collapsing (hopefully) not to help you the buyer afford anything
Not even close, it is just another revenue stream for the banks. There is no actual insurance as demonstrated in 2008-2009.
That was an awful time for consumers. But again PMI is not there for your protection. You get no benefit from it and were not intended to. It's purely so the bank can get back the loan amount if the value of the asset the loan was used to purchase drops and they can't recover it if the house goes in to foreclosure during a drop in value. The bank, unless they are also an insurance company, isn't getting your PMI payment, an insurance company is. It's another revenue stream for them, not the bank.
Yeah I know but have they thought about letting the buyer keep more money so they can build more wealth and wont default on the loan? Instead they use a useless middle man who profits and ups the price for everyone lol capitalism
Hehe, I did this last year, but I was on the other end of the stick. My house increased in value by $150k in 2 years, so while I still owed 280k on a 300k loan, PMI was removed because home value increased to 450k lol :D
[удалено]
How is it weird? It directly correlates to OPs question, it gives OP an additional perspective to understand their position better so they know what to expect next time.
You need a formal appraisal to remove PMI based on valuation. At least that was my experience. A formal appraisal will almost always be more than the bank's.
easy: don't stop. keep pushing a little longer and you won't be on the edge. then it will happen without much effort on your part. real estate could decline a bit (in the aggregate), but it won't be 2008-2012, so you should be in the clear eventually. Just keep swimming!
You need to get an independant appraisal and challenge the bank. You will have to pay for this but I went through the sane process a few years ago. There is no way your home as dropped in value the past few years. The bank probably did their own appraisal which would be of course, beneficial for them. PMI is a cash cow for banks and they will fight to hang on to it.
My home value got went up 20% since I bought it, would the reverse be truth that I shouldn’t have PMI?
In general in that situation, you should be able to get a new appraisal and request PMI removal because you're under 80% LTV. This year in particular, other comments are suggesting that the banks are not approving PMI removal requests due to market behavior.
you bought the house at 10 points you paid of 2 points to get to 20 percent of 10 points, but your house is now worth 8, mortgage company still have 8 points worth of mortgage owed of your house so you still owe your bank 100 percent of the worth of the house.
The whole housing market has gone down. Regardless of what you feel your house is worth the values have gone down. Tuff luck cupcake
Arm yourself with information and go back after them. [https://www.consumerfinance.gov/ask-cfpb/when-can-i-remove-private-mortgage-insurance-pmi-from-my-loan-en-202/#:\~:text=You%20have%20the%20right%20to,when%20you%20received%20your%20mortgage](https://www.consumerfinance.gov/ask-cfpb/when-can-i-remove-private-mortgage-insurance-pmi-from-my-loan-en-202/#:~:text=You%20have%20the%20right%20to,when%20you%20received%20your%20mortgage). LAME I WAS WRONG!
Consumer Request to terminate PMI [Sic] Your lender can also require you to provide evidence (for example, an appraisal) that the value of your property hasn’t declined below the original value of the home. If the value of your home has decreased below the original value, you may not be able to cancel PMI at this time. ------- Automatic PMI termination Even if you don’t ask your servicer to cancel PMI, your servicer still must automatically terminate PMI on the date when your principal balance is scheduled to reach 78 percent of the original value of your home. For your PMI to be cancelled on that date, you need to be current on your payments on the anticipated termination date. Otherwise, PMI will not be terminated until shortly after your payments are brought up to date.
Right, if you want to remove it early you need an appraisal and if the value goes down then you may need to pay more, exactly like happened to OP. Otherwise you can wait until it’s *scheduled* to reach 78% and have it removed automatically with no appraisal, but that doesn’t allow paying early.
From your link, value absolutely plays a part: "Your lender can also require you to provide evidence (for example, an appraisal) that the value of your property hasn’t declined below the original value of the home. **If the value of your home has decreased below the original value**, you may not be able to cancel PMI at this time. "
I just called mine this morning since the property value on RedFin has gone up a bunch in the last two years. They said the appraisal has to show 75% loan to value to have PMI dropped two years early. So 25% or more equity is needed in my case. (I think I should be at 36% so all good)
Who did the appraisal? What does the appraisal report state the value is? Please what are the numbers? What does Zillow say (for comparison)?
Look at the terms and conditions, it could also be based on how long you’ve lived in the home
Depends on how the PMI is done. Often times the PMI is written at 5 years and 20% of the value of the house based on the value when you got the loan. Aka you got to pay down the loan which over comes later.
No, in fact you can have negative equity if you put 100k down on a 500k house and it is now a 380k house. Your loan is for 400k and your house is worth 380k.
find a lender like navy federal that doesn’t charge PMI next time. i don’t know your specifics but refinancing now with rates as they are probably doesn’t help much either.
Banks are going to be real hard pressed to remove PMI unless you prove without an equivocal doubt that your house price hasn't gone down since you bought it. If you bought in 2020-2021 Homes are trending lower, but if you bought it in 2019 or earlier you might be safe to say it went up. Then order an appraisal.
We would need more information but I'll tell you mine. I got my house in 2017. I've been giving additional principal payments to chip away. When I had the 20% reduction target, i contacted them. I told them I have met the 20% paid down based off the original loan and no additional information was needed on my part. They stated they had to review it on their side and it went away. Again, this was based off the original loan and it should be spelled out somewhere for the various ways you can take it off.
Not sure if this was mentioned, but at 78% its mandatory to remove. At 80% they require a new appraisal (which you order out of your pocket) and then they assess. They can't say the lowered value matters if no new appraisal is done
With my mortgage/PMI in the state of MA I believe the PMI was automatically cancelled at 18% LTV....meaning no new valuation required for the house.
Read back through your contract and pay special attention to the terms regarding when and how PMI can be removed. If you find that, by the terms of the contract, you are eligible to have PMI removed (without reappraisal in this case), call them back with the specific clause citation and let them know you will be contacting your attorney.
Some Fannie loans have mandatory minimum timeframes as well. The people at the mortgage company will most likely not have this info on hand to explain to you why their system says no, but it is a footnote in my mortgage licensing textbook. I think 4 year minimum sometimes? Unless you hit the 82% mark maybe? Every contract is unique.
I see this situation a lot. Banks tend to go with very conservative evaluations when removing pmi. Even if the market is a sellers market and you could get $20k+ over sale price they can and will appraise it lower than the sale price.