Author Topic: how to get rid of my PMI....  (Read 5276 times)

FuckRx

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how to get rid of my PMI....
« on: August 05, 2013, 01:43:04 PM »

i bought my condo with 5% down 3 months ago...
mortgage value was about 450k....
it probably has gone up a little now but i pay a few hundred dollars a month of PMI (mortgage insurance) because i failed to put down 20% at the time...
i live in California...
is there a way to get rid of the PMI?

velocistar237

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Re: how to get rid of my PMI....
« Reply #1 on: August 05, 2013, 02:31:42 PM »
Yes. Typically, you pay your mortgage down to 80% LTV and petition your bank to remove PMI. They might require an appraisal.

If you have an FHA or VA mortgage, then it's a different matter. In that case, the only way to remove MI earlier than 5 years into the loan is to refinance.

What is your mortgage rate, and do you have any other debt with a higher rate? PMI increases the effective interest rate anywhere from 1% to 5% depending on the particulars.

slugsworth

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Re: how to get rid of my PMI....
« Reply #2 on: August 07, 2013, 11:30:03 PM »
Another suggestion, given the size of the payment you are going to make (~15% of value) you may also be able to get them to reammoritize your mortgage, which may be a good idea since rates are so low right now.

I did this about a year ago.

Hugh H

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Re: how to get rid of my PMI....
« Reply #3 on: August 09, 2013, 03:46:08 AM »
Yes. Typically, you pay your mortgage down to 80% LTV and petition your bank to remove PMI. They might require an appraisal.

If you have an FHA or VA mortgage, then it's a different matter. In that case, the only way to remove MI earlier than 5 years into the loan is to refinance.

What is your mortgage rate, and do you have any other debt with a higher rate? PMI increases the effective interest rate anywhere from 1% to 5% depending on the particulars.

I have a VA mortgage, 100% financed and do not pay PMI.

velocistar237

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Re: how to get rid of my PMI....
« Reply #4 on: August 09, 2013, 07:53:35 AM »
If you have an FHA or VA mortgage, then it's a different matter. In that case, the only way to remove MI earlier than 5 years into the loan is to refinance.

I have a VA mortgage, 100% financed and do not pay PMI.

You're right, my mistake, that rule doesn't apply to VA loans, which don't have PMI. FHA and VA loans are lumped together in the law as exceptions to PMI cancellation rules, so I lumped them together here.

Also, FHA PMI rules just got a lot worse a month ago, increasing the minimum PMI term from 5 to 11 years. If anyone is considering an FHA loan, be careful.

MustacheMatt

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Re: how to get rid of my PMI....
« Reply #5 on: August 09, 2013, 10:03:58 AM »

i bought my condo with 5% down 3 months ago...
mortgage value was about 450k....
it probably has gone up a little now but i pay a few hundred dollars a month of PMI (mortgage insurance) because i failed to put down 20% at the time...
i live in California...
is there a way to get rid of the PMI?

Previous post about paying down to 20% loan to value are somewhat accurate.  I had gotten a 5% down conventional loan (good credit, special bank offer, nonFHA) and making that PMI payment every month made me nuts.  In my case (and I think many others) you have to hit 22% before the removal of it is *required* by the lending parties.  Between 20 and 22, it's optional for them.  You can ask nicely or write a letter in that small time frame between.

It's a lot of work, and a worthwhile achievement to pay that down and kill the PMI monster.  I know i'm probably the wet blanket of the party for suggesting this - but instead of killing yourself fighting the interest and PMI wave, is there any chance you could sell that property and go for something more Mustachian?  i.e, lower total cost, and lower stress levels

velocistar237

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Re: how to get rid of my PMI....
« Reply #6 on: August 09, 2013, 11:05:32 AM »
Between 20 and 22, it's optional for them.  You can ask nicely or write a letter in that small time frame between.

Here's the law. The value 78% is only associated with the initial amortization schedule. If you reach 78% early, nothing special happens, except that you're already below 80% and can request termination. At 80%, it's not optional for the lender. They have to cancel PMI if you meet the requirements.

FuckRx

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Re: how to get rid of my PMI....
« Reply #7 on: August 09, 2013, 12:24:54 PM »
the interest rate right now is 3.75%..
yes, selling it is definitely an option and just rent for the near future...
so it seems like either refi-ing or waiting 5 years...
i don't want to wait 5 years so i'm going to go with the refi route if i can't sell it for profit...

Numbers Man

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Re: how to get rid of my PMI....
« Reply #8 on: August 09, 2013, 12:34:28 PM »
California real estate is starting to appreciate so it's probably better to not do anything. We need a little bit more information as to your finances. If 5% down payment was all the money that you had in the world, then your options are limited. Selling a $500k property is going to cost you approximately $30k in real estate commission. Refinancing after 3 months? I'm not up to date on all of the re-fi rules, so I don't know if that is possible so soon.

MustacheMatt

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Re: how to get rid of my PMI....
« Reply #9 on: August 10, 2013, 04:33:15 PM »
Between 20 and 22, it's optional for them.  You can ask nicely or write a letter in that small time frame between.

Here's the law. The value 78% is only associated with the initial amortization schedule. If you reach 78% early, nothing special happens, except that you're already below 80% and can request termination. At 80%, it's not optional for the lender. They have to cancel PMI if you meet the requirements.

After a quick google search and personal experienice I'm going to stand by my statement.  The lender is only required to remove it at 78 percent.

At 80 nothing happens.  I still very vividly remember making a 5k principal payment, and having the "drink your ovaltine" moment when they refused to take the pmi off.  At 78 I made two phone calls and it was forcibly removed because they had to.  Then they even prorated a minor portion back at my principal.

velocistar237

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Re: how to get rid of my PMI....
« Reply #10 on: August 10, 2013, 06:05:15 PM »
Even banks get confused about PMI cancellation. To my surprise, my bank automatically removed PMI when we hit 80%, without an appraisal, and they even said we didn't need to request it. As for Google searches, it's like people are playing the telephone game, where they interpret what they read on another web site.

Here are the relevant sections of the law. First, they define the "cancellation date" based on reaching 80% LTV.

Quote
(2) Cancellation date
        The term "cancellation date" means -
          (A) with respect to a fixed rate mortgage, at the option of
        the mortgagor, the date on which the principal balance of the
        mortgage -
            (i) based solely on the initial amortization schedule for
          that mortgage, and irrespective of the outstanding balance
          for that mortgage on that date, is first scheduled to reach
          80 percent of the original value of the property securing the
          loan; or
            (ii) based solely on actual payments, reaches 80 percent of
          the original value of the property securing the loan;

(Mortgagor means borrower.) Then, they define the "termination date" based on the originally scheduled date to reach 78%, not based on actual balance.

Quote
(18) Termination date
        The term "termination date" means -
          (A) with respect to a fixed rate mortgage, the date on which
        the principal balance of the mortgage, based solely on the
        initial amortization schedule for that mortgage, and
        irrespective of the outstanding balance for that mortgage on
        that date, is first scheduled to reach 78 percent of the
        original value of the property securing the loan;

A borrower can initiate cancellation after reaching the cancellation date (defined above as reaching 80%).

Quote
(a) Borrower cancellation
      A requirement for private mortgage insurance in connection with a
    residential mortgage transaction shall be canceled on the
    cancellation date or any later date that the mortgagor fulfills all
    of the requirements under paragraphs (1) through (4), if the
    mortgagor -
        (1) submits a request in writing to the servicer that
      cancellation be initiated;
        (2) has a good payment history with respect to the residential
      mortgage;
        (3) is current on the payments required by the terms of the
      residential mortgage transaction; and
        (4) has satisfied any requirement of the holder of the mortgage
      (as of the date of a request under paragraph (1)) for -
          (A) evidence (of a type established in advance and made known
        to the mortgagor by the servicer promptly upon receipt of a
        request under paragraph (1)) that the value of the property
        securing the mortgage has not declined below the original value
        of the property; and
          (B) certification that the equity of the mortgagor in the
        residence securing the mortgage is unencumbered by a
        subordinate lien.

If the borrower doesn't go through cancellation, PMI gets terminated automatically upon reaching the above defined termination date.

Quote
    (b) Automatic termination
      A requirement for private mortgage insurance in connection with a
    residential mortgage transaction shall terminate with respect to
    payments for that mortgage insurance made by the mortgagor -
        (1) on the termination date if, on that date, the mortgagor is
      current on the payments required by the terms of the residential
      mortgage transaction; or
        (2) if the mortgagor is not current on the termination date, on
      the first day of the first month beginning after the date that
      the mortgagor becomes current on the payments required by the
      terms of the residential mortgage transaction.

So that's the law for the standard case. There's a section excluding FHA and VA loans, a section excluding high-risk loans, and a section excluding lender-paid PMI. This law applies to loans made on or after July 29, 1999.

MustacheMatt

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Re: how to get rid of my PMI....
« Reply #11 on: August 10, 2013, 10:39:41 PM »
Even banks get confused about PMI cancellation. To my surprise, my bank automatically removed PMI when we hit 80%, without an appraisal, and they even said we didn't need to request it. As for Google searches, it's like people are playing the telephone game, where they interpret what they read on another web site.

Here are the relevant sections of the law. First, they define the "cancellation date" based on reaching 80% LTV.

Quote
(2) Cancellation date
        The term "cancellation date" means -
          (A) with respect to a fixed rate mortgage, at the option of
        the mortgagor, the date on which the principal balance of the
        mortgage -
            (i) based solely on the initial amortization schedule for
          that mortgage, and irrespective of the outstanding balance
          for that mortgage on that date, is first scheduled to reach
          80 percent of the original value of the property securing the
          loan; or
            (ii) based solely on actual payments, reaches 80 percent of
          the original value of the property securing the loan;

(Mortgagor means borrower.) Then, they define the "termination date" based on the originally scheduled date to reach 78%, not based on actual balance.

Quote
(18) Termination date
        The term "termination date" means -
          (A) with respect to a fixed rate mortgage, the date on which
        the principal balance of the mortgage, based solely on the
        initial amortization schedule for that mortgage, and
        irrespective of the outstanding balance for that mortgage on
        that date, is first scheduled to reach 78 percent of the
        original value of the property securing the loan;

A borrower can initiate cancellation after reaching the cancellation date (defined above as reaching 80%).

Quote
(a) Borrower cancellation
      A requirement for private mortgage insurance in connection with a
    residential mortgage transaction shall be canceled on the
    cancellation date or any later date that the mortgagor fulfills all
    of the requirements under paragraphs (1) through (4), if the
    mortgagor -
        (1) submits a request in writing to the servicer that
      cancellation be initiated;
        (2) has a good payment history with respect to the residential
      mortgage;
        (3) is current on the payments required by the terms of the
      residential mortgage transaction; and
        (4) has satisfied any requirement of the holder of the mortgage
      (as of the date of a request under paragraph (1)) for -
          (A) evidence (of a type established in advance and made known
        to the mortgagor by the servicer promptly upon receipt of a
        request under paragraph (1)) that the value of the property
        securing the mortgage has not declined below the original value
        of the property; and
          (B) certification that the equity of the mortgagor in the
        residence securing the mortgage is unencumbered by a
        subordinate lien.

If the borrower doesn't go through cancellation, PMI gets terminated automatically upon reaching the above defined termination date.

Quote
    (b) Automatic termination
      A requirement for private mortgage insurance in connection with a
    residential mortgage transaction shall terminate with respect to
    payments for that mortgage insurance made by the mortgagor -
        (1) on the termination date if, on that date, the mortgagor is
      current on the payments required by the terms of the residential
      mortgage transaction; or
        (2) if the mortgagor is not current on the termination date, on
      the first day of the first month beginning after the date that
      the mortgagor becomes current on the payments required by the
      terms of the residential mortgage transaction.

So that's the law for the standard case. There's a section excluding FHA and VA loans, a section excluding high-risk loans, and a section excluding lender-paid PMI. This law applies to loans made on or after July 29, 1999.

So if I understand that correctly, they should have removed it at 80?  But made me hold out unnecessarily until 78.

All I know is.  I got really bent, and focused that energy into scraping together every penny I could find and moved that 2 percent in about a month.

velocistar237

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Re: how to get rid of my PMI....
« Reply #12 on: August 11, 2013, 08:21:49 PM »
So if I understand that correctly, they should have removed it at 80?  But made me hold out unnecessarily until 78.

All I know is.  I got really bent, and focused that energy into scraping together every penny I could find and moved that 2 percent in about a month.

That's what it sounds like. Even if you had known your bank was wrong, the route you took was still the best way to go. That was a much better way to spend your energy than, say, writing angry letters.