Appraisal to Gain Equity?

[Nate LaBlance]

This may be a dumb question, but here it goes...

I purchased a duplex last August (2021) for 325K that I'm currently house hacking. With plans to eventually rent out both sides and hold the property. I used an FHA loan, so I am paying PMI. I'm wondering, if I had an appraisal done this August (2022) and the property is valued higher than what I purchased it for, would that bump up my equity in the property or would that require me to refinance for the new value before the change in equity would take effect?

My thought process was that getting an appraisal and aquiring more equity, getting me to that 20% mark and elimate my PMI. Or am I wasting money on another appraisal at this point?

Any advice or past experiences is much appreciated!

[Frank Avallone II]

Hey @Nate LaBlance, definitely not a dumb question! 

Unfortunately, with and FHA loan the only way to get rid of the mortgage insurance is by refinancing. An appraisal would be part of this process. Then as long as the equity is there you would be able to drop the mortgage insurance.

With that being said, the next thing to consider is the interest rates. You would have to way out the pros and cons of refinancing. With your timeline I am guessing you had a really low interest rate compared to todays rates. You would have to see if refinancing into a new higher interest rate would be offset by the savings of no mortgage insurance.

Hope this helps!