How to remove PMI insurance...20% equity or 20% loan paid off???

[Todd Moriarty]

My girlfriend doesn't want to pay her $200 monthly PMI insurance payment anymore. She's been there 3 years, the house has appreciated significantly, and she now has 20%+ equity in the house.

But her bank, Huntington Bank, won't re-appraise the house and remove the PMI. They tell her she needs 20% paid off from the mortgage. I asked my realtor and she confirmed this.

Is this correct?  Is this the new way of doing business for banks since the recession?  If so, what are her options?  Re-finance into another loan, with a slightly higher interest rate (currently) and pay more closing costs rolled into the payment?  That probably wouldn't save her much.

Are all banks doing this now?

[Chris Mason]

Hi @Todd Moriarty,

Loan servicers (Huntington Bank it appears, in this case) have a perverse incentive to make dropping PMI hard (or impossible) without a refinance, because they want a refi out of it (a shiny new product to sell on the secondary market for $$ as part of a MBS).

Your GF can refinance to drop PMI if Huntington Bank will not simply allow her to drop it with an appraisal, but I'd suggest that you don't reward bad behavior: refinance with a different lender so HB doesn't make money out of this de facto forced refinance. 

 If she doesn't want to reset to year 1 of 30 again, have her inquire about either a 25 year fixed mortgage, or paying extra to still be debt-free 27 years from now on a 30 year fixed.