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My grandmother died recently and left her house to my mother. The house is worth about $20,000 less than is owed on it.

If the house has private mortgage insurance (PMI), this is fine because the loan will be paid off and the house can be sold for a small profit. If there is no PMI then we will just let the bank have the house.

My question is, how do we find out if there is PMI?

In 2005 apparently my grandma took out a home equity loan, but other than that, we can't seem to find any paperwork detailing the home loan.

We know the house was originally purchased in the 1960's for approximately $15,000 but since then the bare minimum was paid, and multiple loans were taken out against it until now. The house is worth $40k if we're lucky, and has a $60k loan.

Anyone have advice on finding out about PMI Insurance?

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Not sure what this means "The house is worth about $20,000 less than it can sell for." It is worth exactly what it can be sold for. – mhoran_psprep Oct 1 '12 at 23:16
@mhoran_psprep : I mistyped. I meant the loan is owed about $20k more than the house is worth. – James P. Wright Oct 2 '12 at 2:22
If it's worth less than the loan, PMI or not, there's no equity to be had. If it has a $60K loan you are only lucky if it's worth more than that. $40K means no money is coming from this house. Sorry. – JoeTaxpayer Oct 2 '12 at 2:30
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Sorry for your loss. – MrChrister♦ Oct 17 '12 at 5:24

2 Answers

up vote 6 down vote accepted

I would have the PoA or executor call the bank to get the specifics on the loan. PMI is only for mortages not Home Equity loans. So if the loans are home equity loans then there would be no PMI.

Also PMI protects the lender in case of default. It will not pay off the mortage in the case of the debtors death. So even if there is PMI all that it would mean is that if you give the house to the bank that they will not lose so much(perhaps any) money on the loan. But it is not going to pay off the home for you to sell at a profit.

However if she has owned the house since the 60's there is probably no PMI. PMI is generally for first mortgages of home purchases. A long term owner can usually find decent financing that does not require PMI, and if it was taken in 2005(or any time before 2008) it is possible that she was able to borrow more than 100% of the homes value then even with out PMI.

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Refinances never have PMI? – JoeTaxpayer Oct 2 '12 at 2:30
@JoeTaxpayer - Not saying that... saying that if you have owned your house since the 60's you can probably find a loan that does not require it. Or at least you could have before 2008. I suspect in 10 or 15 years you will be able to again when we forget the lessons we didnt have to learn because the government bailed them out. – user4127 Oct 2 '12 at 13:17
@JoeTaxpayer - and if you refi the new loan would be the new first mortage. As opposed to a second mortage. First being position in line for repayment in case of default. – user4127 Oct 2 '12 at 13:21
In addition to just being for mortgages, I thought PMI could only be required for mortgages where less than 20% of the purchase price is provided as a down-payment. – Scott A. Lawrence Oct 3 '12 at 20:31
up vote 4 down vote

In my case, I was able to find out by asking the bank that held the mortgage. I had to go down in person and bring all the paperwork I had available. They were able to give me this information within a few minutes.

If the property has private/lenders mortgage insurance, this will either be rolled in to the mortgage payments (common at least in Canada), or will show up as a separate monthly cost. You'll want to examine the bank statements and check with wherever the mortgage payments were going to.

I am sorry for your loss.

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