PMI Question (loan officer, real estate, refinance, loan)

[tmorrell]

I know that more then 80% LTV value require this, but I'm confused with the calculations.

Original purchase of 250,000 with 10% down.

Going through a refi now and was appraised at 270,000. I thought I could just pay 5,000 extra to principal and eliminate it, but my lender says I would need a 279,000 appraisal.

Can anyone help me with the calculations.

[DasNootz]

Okay let me think this through.

You purchased the home for $250,000 with $25,000 down. I'll assume you haven't paid down any extra so you still have only $25,000 in equity based upon the original mortgage.

The new appraisal is $270,000 and you're not taking cash out. So you've got your original $25,000 in equity plus the additional $20,000 in appreciation ($270k-$250k)... giving you a total of $45,000 in equity. The new mortgage is based upon $270,000 not $250,000 so to qualify for the 20% down you'd need $54,000 in equity (an additional $9k out of your pocket).

If the home had appraised for $279,000, you'd have your initial $25k in equity plus an additional $29k in appreication, giving you $54k in equity. 20% of $279k is $55,800, so you'd still have to come out of pocket for a little more to take away the PMI.

[renriq02]

If your appraisal is 270k...you need to be 80% of that.

216k loan amount to avoid PMI.

If you refinance now...and pay the 9k....the lender may still give you a hassle to remove it. It may take you a couple of months to remove it if you pay that 9k after you refinance.

[TimtheGuy]

Originally Posted by tmorrell

I know that more then 80% LTV value require this, but I'm confused with the calculations.

Original purchase of 250,000 with 10% down.

Going through a refi now and was appraised at 270,000. I thought I could just pay 5,000 extra to principal and eliminate it, but my lender says I would need a 279,000 appraisal.

Can anyone help me with the calculations.

To simpify a bit, if your new appraised value is $270,000 the maximum loan amount for your new loan can be $216,000 (80%) to avoid PMI.

If you need more than $216,000 to pay off your current 1st and costs you could bring the cash required to closing or look at taking out a 2nd mortgage to keep your 1st at 80%. Your loan officer should definitely be going over these options with you. If not fire him/her and work with someone qualified.

[tmorrell]

Thanks for the responses. I understand it now.

The appraisal of 270000 was accepted by Fannie Mae site unseen. Is it worth paying the 350 to get a full appraisal in the hopes it comes back at 280000? Based on what I've seen in the area, I don't think there is any chance of that.

[DasNootz]

If you as a borrower can't see any chance of the home appraising for $280k, it's unlikely that an appraiser will either.

I'd keep the $350 or use it to pay down additional principal to help get out of the PMI.

[ChipL]

Why not contact a real estate agent and have them do a CMA for you? I'd start with the one who worked with you when you purchased the house. That way you take most of the guess-work out of what your next move should be.