PMI
I have a 4 rental properties and have done all with no money down. My question is how can one eliminate the PMI associated with these mortages. Now, I have done 70/30 splits etc. on one (and have no PMI on that property), but wanted to know if there are any other (creative) ways to eliminate PMI when doing 100 LTV loans.
Additionally, How does one get rid of PMI. I understand that at 80% this is automatic and I can get the house re-appraised etc etc. Any other ways that you folks have found to work? I was going to call the company and ask this week what are there criteria. I have heard a few things such as (2 years with good payments some companies will eliminate it) thanks for the advice.
Well all of your properties would have to be appraised to be able to tell if you have any options. Once you get the appraisal you will be able to see if the house increased in value. At that point you could turn 3 loans into six with 80/20's. Or go to a bank that has no PMI at 100%. Two years of good payments does not exempt you from the rest of the money. Whoever told you that is wrong. If the properties have increased in value by 20% you may be able to summit the appraisal and the bank will readjust the your mortgage statement to reflect this change.
Those are the only way I know have worked to get rid of MI in the last 16 years of dealing with banks
Lori
[addsig]
Good advice Lori! I agree 100%
Lenders are required by law to drop PMI at 80% LTV. However, they base that on how much Principle you have paid down. If you have not paid down to 80%, you will have to get an appraisal.
Good luck!
Quote:I have heard a few things such as (2 years with good payments some companies will eliminate it).
What you heard is not the full story. A lender is not required to consider your application for waiver of PMI until you have made timely payments for 24 consecutive months. At that time, if a new appraisal (ordered by the lender) shows that you now have at least 20% equity in your property, the lender will waive PMI for the balance of your loan term.
Can someone comment on the oft-heard rumor and suspicion that lenders won't tell you when PMI is no longer necessary (i.e., when you've satisfied the conditions mentioned above to remove PMI)?
I have heard the borrower has to be vigilant enough and make the request to re-evaluate the note to remove the MI, otherwise the lender will happily keep collecting that extra money.
Are the ranters/venters right or just anti-lender?
-ak
If you put less than 20 percent down on a home mortgage, lenders often require you to have Private Mortgage Insurance (PMI). PMI protects the lender if you default on the loan.
The Homeowners Protection Act of 1998 - which became effective in 1999 - establishes rules for automatic termination and borrower cancellation of PMI on home mortgages. These protections apply to certain home mortgages signed on or after July 29, 1999 for the purchase, initial construction, or refinance of a single-family home. These protections do not apply to government-insured FHA or VA loans or to loans with lender-paid PMI.
For home mortgages signed on or after July 29, 1999, your PMI must - with certain exceptions - be terminated automatically when you reach 22% equity in your home based on the original property value, if your mortgage payments are current. Your PMI also can be canceled, when you request - with certain exceptions - when you reach 20 percent equity in your home based on the original property value, if your mortgage payments are current.
One exception is if your loan is "high-risk." Another is if you have not been current on your payments within the year prior to the time for termination or cancellation. A third is if you have other liens on your property. For these loans, your PMI may continue.
If you signed your mortgage before July 29, 1999, you can ask to have the PMI canceled once you exceed 20 percent equity in your home. But federal law does not require your lender or mortgage servicer to cancel the insurance.
New borrowers covered by the law must be told - at closing and once a year - about PMI termination and cancellation. Even though the law's termination and cancellation rights do not cover loans that were signed before July 29, 1999, or loans with lender-paid PMI signed on any date, lenders or mortgage servicers must tell borrowers about the termination or cancellation rights they may otherwise have under those loans (such as rights established by the contract or state law).
Once PMI is cancelled on a SFR, can you get a refund of those monies?
No. PMI is an insurance policy. While the insurance is in force, you are charged a monthly premium. When the policy is cancelled, your premium payments stop.
When you do deals no money down you can do an 80% 1st mortgage and 20% 2nd mortgage to get around paying PMI. Ask your mortgage broker.
Alas, the provisions of the Homeowners Protection Act of 1998 which provide for the automatic termination of and borrower cancellation of PMI do not apply to investment property. The Act states very clearly in the definitions section that only residential mortgages on a "primary residence" are protected under the Act. A subtle but important point.
You can always go ahead and request removal anyway and hope the bank doesn't know about this distinction or overlooks the fact. You may get lucky. If not, the only sure way is to refinance the mortgage into a 80% or less LTV. 80/20s upfront work as well, just watch that rate on the 2nd, you could end up paying more than with one mortgage and PMI. Both 2nd interest and PMI are deductable expenses for investment property.