Eliminating PMI
Being a new investor, I was unfamiliar with PMI and how much it costs. ($84/100k loan). I was only looking at low down even tho it I had enough for the 20% down. I have contacted my lender about paying down to the 80% LTV and they said their policy is that it had to remain in effect for 24 months regardless of what we pay to add to the equity. Is this legal? Can they refuse my request? thanks Pete
PS this loan was taken out Aug/03[ Edited by eximage on Date 04/19/2004 ]
PMI can only stay in affect until you have 20% equity in the property. Now the bank can dispute your appraisal if you did work and said the house was now worth more. They can not dispute anything if you pay the principal down until you owe them 80% of the purchase price.
Lori
[addsig]
PMI is required for the life of the loan on FHA mortgages. Also lenders are required by law to remove PMI only when the principal balance falls below 80% of the orginal loan amount, not the appraised value. Read the fine print in the mortgage and you'll see.
If the property in question is an investment property and not your primary residence, the bank is well within its right to refuse any request you make to drop PMI. This is because the law that governs the termination of PMI, the Homeowner's Protection Act of 1998, only covers residential mortgages held on "primary residences." Of course, you can still always ask, and you might get lucky, but don't demand.
Also the Act measures the LTV based on the ratio of the principal balance of the mortgage with respect to the original value of the property at closing as determined by the appraisal. That's why I always like to be present when the bank ordered appraisor shows up at the property. By being present, pointing out the property's highlights, and bringing your own comp.s to his attention, you can influence the appraisal upward.
Since it has been a year, why don't you refinance ? Depending on your situation you may be able to drop the pmi if the value is there.