Tricky PMI Removal Question

[Alex31]

I purchased a property in March 2017 and took out a standard 30 year fixed loan. I paid 15% down for the property and took out a loan of 85% of the value. The loan came with a PMI of around $70 a month.

Over the course of this year, I have aggressively paid down the principal of the loan. Today the principal is close to 70% LTV to the purchase price.  I've recently contacted my lender regarding removal of the PMI and they have stated the following;

- Within the first 0-2 years of the loan, irregardless of LTV ratio, you must show significant improvements have ben made to the property, supported by increased square footage, this is a requirement when the loan is under two years.
- Once the loan reaches 2-5 years, the appraisal needs to come in at 75% LTV but does not need to be supported by increased square footage.
- At five years plus, the appraisal would need to come in at 80% LTV and again wouldn't need to be supported by increased square footage.

is there any course of action available to remove the PMI within the first two years?  (without adding square footage)?.

Is the requirement for adding square footage normal for lenders? I was not aware of this at the time of signing. I though the PMI is there to reduce default risk, I would think the additional principal payment should give them the lenders enough comfort...

Any advice appreciated as I feel like a big sucker paying the extra $70 every month.

Thanks.

[Another Reader]

You can refinance.  However, unless you can get a no cost refinance at an equal or lower rate, it probably does not make sense. 

[Duke03]

I'm sorry the banks stuck it to you this round.  Now learn from this going forward and never pay PMI again.

[Clever Name]

It sounds like your lender may be violating federal law...

https://www.consumerfinance.gov/ask-cfpb/when-can-i-remove-private-mortgage-insurance-pmi-from-my-loan-en-202/

You can ask to cancel PMI earlier if you have made additional payments that reduce the principal balance of your mortgage to 80 percent of the original value of your home. For this purpose, “original value” generally means either the contract sales price or the appraised value of your home at the time you purchased it, whichever is lower (or, if you have refinanced, the appraised value at the time you refinanced).

There are some exceptions to this (e.g. FHA loans), but if you have a conventional fixed-rate mortgage this very likely applies.

Edit: the criteria they gave you are correct if you are trying to remove PMI based on the appreciated value of your home rather than the original value or purchase price. Perhaps the representative you spoke to simply misunderstood your situation.