Canceling PMI After the first year?

[Ricardo S.]

We own a house which we bought last December 2013 for $355,000 in Brooklyn New York. We put $50,000 for the down payment so the amount we owe is $305,000. We have PMI on your loan. our payment is about $2050 a month. $1500 of that is principal an interest.

But when we originally purchased the home the appraisal came in at $370,000 and as of this month the state values our property at $390,000 (based on property tax assessment paper)  

Its about to be a year now can we have the PMI removed based on the appraisal LTV of the house at the time when it was purchased instead of the actual cost? or even based on the property tax assessment?

In other words can we get the mortgage company to remove the PMI based on appreciation?

All payments are current. 

[Mary B.]

Originally posted by @Ricardo S.:

We own a house which we bought last December 2013 for $355,000 in Brooklyn New York. We put $50,000 for the down payment so the amount we owe is $305,000. We have PMI on your loan. our payment is about $2050 a month. $1500 of that is principal an interest.

But when we originally purchased the home the appraisal came in at $370,000 and as of this month the state values our property at $390,000 (based on property tax assessment paper)  

Its about to be a year now can we have the PMI removed based on the appraisal LTV of the house at the time when it was purchased instead of the actual cost? or even based on the property tax assessment?

In other words can we get the mortgage company to remove the PMI based on appreciation?

All payments are current. 

Check out the info in this link: http://www.consumerfinance.gov/askcfpb/202/when-ca...

Kudos,

Mary

[Ricardo S.]

• "Your lender can also require you to provide evidence (for example, an appraisal) that the value of your property hasn

[Mary B.]

Originally posted by @Ricardo S.:

• "Your lender can also require you to provide evidence (for example, an appraisal) that the value of your property hasn

[Elizabeth Colegrove]

We have been told that you have to "pay it off" that the only way to have it come off via appreciate is to refinance. If you find anything different I would love to be tagged :)

[Dion DePaoli]

For clarity, there are two types of Mortgage Insurance. Private Mortgage Insurance (PMI) and Mortgage Insurance Premium (MIP) / (MI)

MIP is for FHA loans. MIP rules changed last year. 90% or less LTV at origination mandates 11 years of insurance. Greater than 90% the insurance is mandatory for the life of the loan. There is no equity level which allows for removal of MIP any longer.

PMI is insurance for other types of loans that are not FHA, so loans going to Fannie/Freddie or held in portfolio.  There is a minimum term to PMI which is either 2 years or 5 years.  In order to cancel/remove PMI prior to 2 years, improvements need to be made to the property.  If no improvements are made, you have to carry PMI for at least 2 years.  After 2 years PMI can be requested to be removed provide 25% equity has been earned, so the LTV needs t be 75% or greater.  At 5 years or greater the PMI can be canceled/removed if the borrower has earned 20% equity or more.  

Property assessments are NOT property appraisals.  The Mortgagee would need to obtain an appraisal to reveal the borrower's equity.  Borrower's should not expect a Mortgagee to use a Borrower supplied appraisal.  The Mortgagee will have to order and receive it one on their own.  

If the Borrower believes they have enough equity built up in the property and have also satisfied the terms above, then they should right a formal letter to their Mortgage Servicer making a request for review and removal.  A Borrower will not likely be able to successfully argue with a Mortgagee on appraised value.  So, I will just leave those ideas alone.  

[Jon Holdman]

You should review your loan documents and perhaps discuss this with your lender. When I looked into it (perhaps 15 years ago), they would NOT consider appreciation at all when removing PMI. You had to be below 80% of the original purchase price to get the PMI off. That still required an appraisal to verify the value hadn't fallen. But if the appraisal came in higher than the original purchase price it didn't matter. The PMI I had on this house would have been automatically removed when the loan balance was 78% of the original purchase price.

[NA Jones]

I thought I heard through the grapevine that PMI was for the life of the loan on any loans closed after June 1 2013 and that it couldn't be removed. I could be (and quite often am) wrong.

[Dion DePaoli]

@Jon Holdman the PMI rules were amended in 1999 to the guides I stated above. I personally believe the rule as it stands now is fairly logical. Risk decrease is tough to quantify with less than 24 periods. If a Borrower misses a payment, the insurance can stick around - I can't remember how long that term extension can be. Obviously the minimal term is to avoid wacky market increases but if the property is improved, it makes sense value would be affected, possibly anyway.

@NA Jones you are talking about MIP/MI which is for FHA loans, as I stated above.

PMI and MI is often referred to as PMI colloquially but they are not the same thing.  That loose terminology does tend to confuse the public. 

For further clarity to what I wrote above which never seems to be sufficent for folks here is a cheat sheet for MGIC one of a couple of PMI companies.  Note what I shared above can be found on respectively  on page 4 and page 5 for each of the two GSE's.  Portfolio held mortgages will most likely follow these two guides as well:

http://www.mgic.com/pdfs/71-41599hopa.pdf

Borrower-Requested Cancellation

For mortgages closed on or after 7/29/99, the LTV

ratio must be:

80% or less, if 5 years or more have elapsed since the

origination date of the mortgage, OR

75% or less, if 2 or more years, but less than 5

years, have elapsed since the origination date of the

mortgage.

The minimum seasoning requirement does not apply if

the increase in value is a result of property improvements

made after the origination date of the mortgage. LTV

needs to be 80% or less.

[Wayne Brooks]

On FHA if you put down less than 10%, it's for the life of the loan. There's a chart showing the different down payments and lengths of loans, which determine when and if FHA MIP can be removed.

http://www.fha.com/fha_requirements_mortgage_insurance

[Dion DePaoli]

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