Creative ways to eliminate PMI? (loan, interest rate, escrow, approved)

[Miker2069]

I have a friend who put 10% down and as a result has PMI. It's been about 6 months, and property has increased in his area. It was new construction, so technically he walked in with equity. We were discussing options of eliminating PMI which is a hefty 260/mo. The obvious way is to add another 10% to the principle which is about $40K (which he can do). Now I told him since his value has increased he can request another appraisal which should add at least another $20K at least to the value of his home bringing his LTV above 10% to around 15% or so, so technically he might not need to put up the full $40K, but rather maybe $20K to get to 20% and then eliminate PMI. I believe the lender said something about seasoning and needing to wait 6 months before that- so it's been about 6 months. We aksed the lender other ways cause a re-appraisal of the value of the home, and they said if you add on to the home, i.e., adding a sun room. So we were thinking, spend the money that he would have put towards principal on a sun-room (or something else that would add to the structure), then get a reappraisal. The increased property value *and* the addition/expansion should put him above 20%. This would be desireable in that he can "see" where his money is going, he gets more leverage from it (i.e., spend $20K to increase the value say $25K-$30K) and he can elminate the PMI- and since he only would spend half of the $40K he can keep the other $20K in his back pocket. Worst case he would dump the $40K in (which the lender would obviously want).

Anyway, any of the pros out there have any thoughts on this? Are we making it to complex, can he just order an appraisal and just see if his house is worth more?

Thank You

[CharlotteAgent]

Get a 80% loan on the first and whatever he needs on the second. This will elimainate it right away. If he has 20 % equity he can do away with it also like you stated. PMI is now tax deductible as of the first of the year.

[Miker2069]

Originally Posted by CharlotteAgent

Get a 80% loan on the first and whatever he needs on the second. This will elimainate it right away. If he has 20 % equity he can do away with it also like you stated. PMI is now tax deductible as of the first of the year.

well was hoping not to get a second loan but use the appreciation. but after doing some digging we found out that if you buy after 1999 the lender may only consider the value at closing and not consider the appreciated value when calculating ltv...

[idaho gal mortgage]

Try lender paid P.M.I. It will raise your rate a little bit .5% or so, but paying it in the rate means it is tax deductible.

[Taboo]

I waiteduntil homes near mine and comparable to mine were selling at a rate 20% higher then what I paid. This is easy to find out in the papers, websites, talking to neighbors etc... When they were selling at a price 20% higher then what I bought at, I refinanced. No improvements, no 20K... nothing. Ask your mortgage guy. I did not have to pay anything out of pocket. It took about a year for the value of homes in the area to rise enough for me to do this but hmmm... 260/month for 6 more months is nothing compared to 20-40K. Good Luck.

[mkoby]

Do not order your own appraisal. It is unlikely the lender will use it. Lenders have a list of approved appraisers that they use. Most mortgage companies require you to keep the PMI for at least 12 months if not 24 under the original terms. Your friend could refinance but that would incurr another set of closing costs. I have never heard of the "add on to the home" theory and I have worked for a mortgage company for the last 9 years. The $260/month seems high. I'm wondering if there were credit issues or a jumbo loan amount? Also, a second mortgage is not always saving you money. Second mortgages tend to have a higher interest rate so the payment would be higher than the PMI. Now that PMI is tax deductible it does not make sense.

[Donewithpmi]

I'm sorry I'm posting on to someone else's question, with a new question-- new to this, couldn't figure out how to start a new forum!

Anyhow, my problem is that I was very ignorant when I purchased my 1st house at 25 years old! A combination of empty/mis-leading promises from my mortgage broker and just being so excited to be a homeowner got me into SERIOUS financial trouble!

I have been in my home for almost 5 years and have been paying $500.00 per month in PMI. I was told it would automatically end after 2 years
My monthly mortgage payments are about $1700.00 p/m with PMI for a little two bedroom town house in Hudson WI.

Throughout the 5 years in a struggle to attempt to keep up and pay for my awful mistake, my credit has gone down the drain, due to mortgage lates and other bills being paid late. I spent the last year & 1/2 working extra p/t jobs to bring my credit up and make no late payments on anything-- I succeeded and the score came up, only to attempt the refinance process and be denied. After 3 months of trying to get the loan closed my lender can't get it through underwriting (FHA Loan, as this is the only kind that I would be able to qualify for).

Now, due to a financial set back, we are late again, after our streak of good paying/no lates. As we are now again 30 days late, we are at our wits end, have tried selling-- no luck due to crap market. Have no lump sum of cash of course to end the PMI. We want out of this situation so bad that I am half tempted to begin sending in my mortgage payments, less the $500.00 p/month for PMI. In September it will be $30,000.00 that I have paid. WELL over what 20% would've been down on this house that I bought for $143,000.00 5 years ago.

What should I do, I can't afford, can't sell and credit is in the crapper-- do I become a statistic and just go into foreclosure? Will lenders ever just end it to avoid losing the loan to a foreclosure... it doesn't appear so. My only option has been the mortgage forbearance deal, which just puts you more financially behind, as it will go on back end of laon and still gives you lates every month on credit.

Anyone have anything to offer me.... Clearly desperate here!

[Karla with a K]

Donewithpmi
The est PMI on a $143k mortgage is around $125 a month are you sure you are not including the escrow(taxes & ins) amt in the $500 a month amount?

[LaceyEx]

Lenders don't automatically drop PMI. You have to be a good consumer and check things out and take matters into your own hands.

I agree with Karla, your taxes,etc must be in that figure.

[Donewithpmi]

Originally Posted by Karla with a K

Donewithpmi
The est PMI on a $143k mortgage is around $125 a month are you sure you are not including the escrow(taxes & ins) amt in the $500 a month amount?

Here is my breakdown:
Total Payment P & I & PMI: $1687.66
Principal: $ 148.99
Interest: $832.66
PMI: $501.25
Escrow (For Prop. taxes & insurance): $204.76
Hudson WI. Taxes are high.. mine last year were well over $2500.00

At the time, I just didn't know how absurd it was... figured I'd suck up the 12k loss over two years, as I didn't have a down payment and then it would automatically drop, after two years, as my broker advised.

Now I'm in a horrible bind! I realized in September of this year, it will be 5 years in this mortgage and thats 30k I've paid into PMI. Shouldn't there be some cap or something???

Thanks again for your help!