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I am asking this on behalf of a friend. They bought a duplex for tax value, when the duplex was appraised for the loan it came back at $195,000. Their loan was a 95% loan. Even though he only put down 5% the property was worth almost 2X's the amount of the load. The bank said he still had to pay PMI. He recently called the bank and they said the only way to get rid of the PMI was to refinance and the going rate was just a little less than his current rate.
Do any of you know of a way to eliminate the PMI without having to refi?
That might be an option but he is trying to get out of the expense of a refi. I was hoping someone here on CDF might know a way around a refi.
You could roll the costs of the refi into the mortgage. Since the property is worth so much more than the loan, it shouldn't be a problem.
But I was under the impression that the Homeowners Protection Act (1998) prohibited PMI if the owner had at least 22% equity in their home, so I'm not sure how the bank is getting away with this.
I know we got a good deal on a house we had years ago. We only put down 5 percent I think. After about six months we had it appraised. We were hoping to get a home equity line to finish the basement. (Turned out to be the worst decision we ever made but that's a different point.)
Anyway it appraised for about $80K more than what our loan was for. We tried to talk to the bank to get the PMI taken off but it didn't happen. I don't remember all the different reasons they gave us, but they wouldn't take it off.
When I payed down my mortgage so it was 80% of the original purchase I just sent them a formal letter requesting it be dropped and they did... have done that on two different properties... never have had a problem getting it dropped at the 80% point. I hear those horror stories but guess we've been lucky.
When I payed down my mortgage so it was 80% of the original purchase I just sent them a formal letter requesting it be dropped and they did... have done that on two different properties... never have had a problem getting it dropped at the 80% point. I hear those horror stories but guess we've been lucky.
Great tips and info, thanks everyone.
He is just going to let it be. A few years down the road he can take Dave's advice and request it be dropped once below the 80% point.
I called my mortgage company and they said if I paid to have a BPO (Broker's Price Opinion), and my house appraised at such an amount that I had my 20% equity, they would drop my PMI. I paid $150 for the BPO, which is like an abbreviated appraisal, and my PMI was dropped within one month. No other costs associated with the process. The Broker had to be chosen by my mortgage company. That was the only rule to follow.
Good luck.
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