Quote from @Samuel Metcalf:
Hey all, first post, please be nice ;)
My first property purchase was in 2017. I very much was guided by a family member and just did whatever they said. Been a great experience for 7 years. On a whim, I recently reviewed a monthly mortgage statement and saw I'm paying $150 in PMI. I have over 40% equity based on loan amount of $200K and general market value of the property at $400K (unsure what assessed value would be).
I'm thinking I'm a candidate for PMI removal. Called the bank, who quickly said "sorry, your loan does not have an option for PMI removal." Apparently, the contract I executed included a clause for PMI for the life of the loan. I'm shocked and embarrassed because I've never heard of "forever PMI". Yes, I'm a noob, but I've only ever heard of PMI coming off once you satisfy equity requirements. So here I am thinking oh great, I am past due on doing this, but at least I'll start to save another $150/mo!
Nope.
Mortgage servicer says only way to remove it is to re-fi. I guess I'm asking how common this is; if I would have been successful in somehow negotiating out of that clause; and if I have ay options to remove PMI at all? I'm just so deflated! Forever PMI? Ugh!
I know it sucks but FHA does require MI for the life of the loan unless you put 10% or more down and then it drops to 11 years. A couple of thoughts about your situation.
1) Statistically speaking most people stay in their home/mortgage for 5-7 years so you're right at the end of that range. It doesn't sound like you have plans to sell anytime soon, right?
2) The FHA MI you're paying is going down every year based on the principle balance.
3) You could look into a cash-out refi to see if rolling in other debt helps it make sense to refinance. For example, I just had a client refinance out of a VA 30 year fixed loan at a ridiculously low rate &, even though their rate went up, they're saving over $2,100 per month thanks to the debts we paid off.
You obviously want to go from an FHA loan to conventional to avoid the MI. That saves you $150 per month right out of the gate but it will probably be offset by the closing costs and the increased rate. That's where rolling in other debt could really make the difference.
