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Old 04-29-2015, 05:31 AM
 
672 posts, read 600,423 times
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So I know I need 20% of the home's value paid off to get rid of it. (I do have a date listed, but I pay a little extra to principal each month.)

I was wondering if there were any ways to get rid of it early? I would be willing to pay a sum of cash to principal (but currently do not have enough to get me to 20%).

Is the home value what I paid for it or the appraised amount or something different?
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Old 04-29-2015, 12:15 PM
 
2,682 posts, read 4,213,117 times
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Here is how it goes generally. BTW, if you ask your lender, they will send you the exact information as applied to your case. This may slightly differ from lender to lender.

1) there is requirement for no-late payment history- at least you need to have a year or more clean payment history.

2) the 20% rule is if you pay to the 80% of the original appraised value. They will order an appraisal that need to show that you still have 20% in the property meaning current appraisal need to show at least the one that the current loan was based on.

3) if your current equity is NOT 20% of the original appraised value (doesn't mean 20% of market value) but your think that your house value increased more than the previously appraised value as combination of market and update that you have done, you need 25% equity for them to remove it.

Since you said you do not have 20% equity in the house (whatever method that you used to determine this), you keep putting extra and watch your local market. When you think that the combination of your local market, your extra payment, and update you do to the house is significant enough, ask for the removal. Then they would order an appraisal.

Hope this helps.

Good luck!
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Old 04-29-2015, 12:24 PM
 
Location: New York
2,251 posts, read 4,160,232 times
Reputation: 1607
Quote:
Originally Posted by Pragmaticus View Post
Here is how it goes generally. BTW, if you ask your lender, they will send you the exact information as applied to your case. This may slightly differ from lender to lender.

1) there is requirement for no-late payment history- at least you need to have a year or more clean payment history.

2) the 20% rule is if you pay to the 80% of the original appraised value. They will order an appraisal that need to show that you still have 20% in the property meaning current appraisal need to show at least the one that the current loan was based on.

3) if your current equity is NOT 20% of the original appraised value (doesn't mean 20% of market value) but your think that your house value increased more than the previously appraised value as combination of market and update that you have done, you need 25% equity for them to remove it.

Since you said you do not have 20% equity in the house (whatever method that you used to determine this), you keep putting extra and watch your local market. When you think that the combination of your local market, your extra payment, and update you do to the house is significant enough, ask for the removal. Then they would order an appraisal.

Hope this helps.

Good luck!

Good Suggestion - ask your lender, they will send you the exact information as applied to your case.

Adding - they would order an appraisal - OP has to pay for.....
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Old 04-29-2015, 12:39 PM
 
12,405 posts, read 9,195,957 times
Reputation: 8856
Quote:
Originally Posted by Shutout View Post
So I know I need 20% of the home's value paid off to get rid of it. (I do have a date listed, but I pay a little extra to principal each month.)

I was wondering if there were any ways to get rid of it early? I would be willing to pay a sum of cash to principal (but currently do not have enough to get me to 20%).

Is the home value what I paid for it or the appraised amount or something different?
If you get close to 20% but not quite there, you might be able to get a 90% LTV HELOC and pay down the 1st loan enough to drop PMI. If you only need to borrow a little bit to do it, the interest cost you add is likely to be less than you save by dropping PMI.

For example, if you have 17% equity, you could qualify for a 90% LTV heloc, which would give you a limit of 7% of the appraised value (90%-(100%-17%)). You would write a big check from your HELOC to your mortgage, designated as principal reduction, of 3% of the original purchase value of the property, which is well within the limit of the HELOC. Once the transaction clears the 1st loan would then be at 80% LTV based on original price, allowing you to drop PMI. Do the math for your case and see what your breakeven point is on PMI vs. extra interest.

You also don't lose any tax deduction since the HELOC debt would still be acquisition debt.
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Old 04-29-2015, 01:30 PM
 
Location: Somewhere in USA
537 posts, read 452,696 times
Reputation: 467
How long have you been living in the house? Read the purchasing contract thoroughly as well to make sure you understand the agreements between you and the lender. If you're currently underwater and have been in the house for more than a year, first try to seek out to home affordable program and refinance to a lower rate.

Do you do a 80/20 loan or a 80/10/10? or 90/10?

Either way, you still have tax deduction in the end of the year but, PMI is free money to the lender.

good luck
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Old 04-29-2015, 02:34 PM
 
2,682 posts, read 4,213,117 times
Reputation: 2264
Quote:
Originally Posted by ncole1 View Post
If you get close to 20% but not quite there, you might be able to get a 90% LTV HELOC and pay down the 1st loan enough to drop PMI. If you only need to borrow a little bit to do it, the interest cost you add is likely to be less than you save by dropping PMI.

For example, if you have 17% equity, you could qualify for a 90% LTV heloc, which would give you a limit of 7% of the appraised value (90%-(100%-17%)). You would write a big check from your HELOC to your mortgage, designated as principal reduction, of 3% of the original purchase value of the property, which is well within the limit of the HELOC. Once the transaction clears the 1st loan would then be at 80% LTV based on original price, allowing you to drop PMI. Do the math for your case and see what your breakeven point is on PMI vs. extra interest.

You also don't lose any tax deduction since the HELOC debt would still be acquisition debt.
Really? You think the lender won't check any other junior loan on the property? This is robbing Peter to pay Paul, which is not going to fly.
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Old 04-29-2015, 02:41 PM
 
12,405 posts, read 9,195,957 times
Reputation: 8856
Quote:
Originally Posted by Pragmaticus View Post
Really? You think the lender won't check any other junior loan on the property? This is robbing Peter to pay Paul, which is not going to fly.
It's exactly what they do in a piggyback loan. The only difference is that it is being done after the property was purchased, not at the same time.

Of course OP should read the mortgage contract to be sure.
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Old 04-30-2015, 05:15 AM
 
672 posts, read 600,423 times
Reputation: 865
Quote:
Originally Posted by Pragmaticus View Post
Here is how it goes generally. BTW, if you ask your lender, they will send you the exact information as applied to your case. This may slightly differ from lender to lender.

1) there is requirement for no-late payment history- at least you need to have a year or more clean payment history.

2) the 20% rule is if you pay to the 80% of the original appraised value. They will order an appraisal that need to show that you still have 20% in the property meaning current appraisal need to show at least the one that the current loan was based on.

3) if your current equity is NOT 20% of the original appraised value (doesn't mean 20% of market value) but your think that your house value increased more than the previously appraised value as combination of market and update that you have done, you need 25% equity for them to remove it.

Since you said you do not have 20% equity in the house (whatever method that you used to determine this), you keep putting extra and watch your local market. When you think that the combination of your local market, your extra payment, and update you do to the house is significant enough, ask for the removal. Then they would order an appraisal.

Hope this helps.

Good luck!
It says 80% of the purchase price or original appraised value.
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Old 04-30-2015, 07:00 AM
 
Location: MID ATLANTIC
7,598 posts, read 17,614,249 times
Reputation: 8078
Quote:
Originally Posted by Pragmaticus View Post
Really? You think the lender won't check any other junior loan on the property? This is robbing Peter to pay Paul, which is not going to fly.
You are using a mighty broad brush for a single stroke. I do this all day long, in all 50 States, on fixed rate and portfolio ARMs, replace loans with PMI with combo loans. The last analysis I ran for a borrower was saving the family $377 per month - their PMI was not deductible, but now their interest is and they were far from a credit risk.

Also, not all lenders require 25% equity to remove PMI. We require 20%. The Homeowners Disclosure Improvement Act requires all lenders to have a written policy regarding their requirements to remove PMI. YMMV - so definitely contact your lender.
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Old 04-30-2015, 01:51 PM
 
2,682 posts, read 4,213,117 times
Reputation: 2264
Quote:
Originally Posted by SmartMoney View Post
You are using a mighty broad brush for a single stroke. I do this all day long, in all 50 States, on fixed rate and portfolio ARMs, replace loans with PMI with combo loans. The last analysis I ran for a borrower was saving the family $377 per month - their PMI was not deductible, but now their interest is and they were far from a credit risk.

Also, not all lenders require 25% equity to remove PMI. We require 20%. The Homeowners Disclosure Improvement Act requires all lenders to have a written policy regarding their requirements to remove PMI. YMMV - so definitely contact your lender.
You are refinancing with closing cost not simply removing the PMI, are you?
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