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I have studied questions around Mortgage Insurance removal and various experiences (mostly painful) with lenders in this process.

I had budgeted and readied myself to make a principal payment to bring our stake in the house to 20% but the website said to call their helpline. So I did. They said there may be other ways to remove the MI and so I learned that property appraisal can be one way to do so.

On a related but separate note, I was told on the phone that because I have had the mortgage for less than 5 years, I would have to bring my stake in the house to 25% (not 20%). Not sure I recall this in the terms/agreement. Is this even possible?

I live in the San Francisco Bay Area and I'd be shocked if the appraisal comes lower than when we bought (8 months ago. We also made home improvements). But the question I have is, if I go the route of appraisal, would that increase my property taxes?

Also, for academic purposes, if the appraisal comes lower, would the property tax reduce?

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    25% if under 5 years is standard. I too was surprised when I found that out!
    – BobbyScon
    Apr 21, 2021 at 19:18
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    Here's a handy rundown of how assessments work in SF: sfassessor.org/property-information/homeowners/…
    – Hart CO
    Apr 21, 2021 at 19:32
  • You can also remove PMI with a refi at 80%, rather than waiting until 75% or 5 years. Sometimes refi-ing even at the same rate can be worth it just to remove PMI (assuming you can do a no-cost refi, which is all the rage these days).
    – TTT
    Apr 21, 2021 at 20:32
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    @perennial_noob lenders make most of their money on the interest. Loan initiation fees are kind of like gravy to them. There's so much competition right now that my existing lender let me refi with them at no cost, for fear I would otherwise go refi somewhere else. It helps if you are friends with a mortgage broker, but I've seen some advertised that really appeared to be free, even without having a friend.
    – TTT
    Apr 21, 2021 at 20:51
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    The primary reason they do 'no cost' re-fi is because they are getting a credit for giving you a higher rate. Just like you can buy points to get a lower rate, you can get a lender credit if you accept a higher rate.
    – Hart CO
    Apr 22, 2021 at 5:54

1 Answer 1

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Private appraisals are not used to calculate taxes. Tax assessments are performed by the government (city/county/state) collecting those taxes. You can use an appraisal to appeal a tax assessment, but the appraiser you hire won't send the information off to them for use. In fact, if you hire the appraiser independently, they shouldn't send it to anyone but you. Tax assessors typically use different forms and methodologies to evaluate value than an appraiser will.

The downside to having an appraisal done is the cost, which can be several hundred dollars. I would recommend contacting a realtor (maybe the one that assisted with your home purchase originally, if you care to speak to them) and ask for their opinion on market value. That should give you a solid idea about where you might expect an appraisal to come in. Weigh the cost of the appraisal against what you might save in PMI. For instance, if the appraisal costs $600, but you only have $550 worth of PMI to pay before the PMI would "organically" fall away (loan to value ratio), then it wouldn't be worth doing. If you've still got years left of PMI to pay, then it might certainly be worth pursuing.

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    For removing PMI specifically, you may want to check with the bank first to see if you can use any appraiser, or if you have to pick one from an approved list, or if the bank wants to choose an appraiser for you.
    – TTT
    Apr 21, 2021 at 19:59
  • In my case, all the inputs taken into account (realtor, time for PMI to fall away and a much smaller cost of appraisal) it seems like I should explore this route. Of course paying down a bulk prepayment is possible in a few months when I expect some money. But in that route the lender is saying 25%. I think like @TTT says, they may require me to pick from their list. They haven't yet responded.
    – perennial_noob
    Apr 21, 2021 at 20:51
  • This is something to pay attention to when choosing lenders, some are a hassle to deal with when it comes to removing PMI and others make it very slick (my first home loan was through a credit union, they removed it at 80% LTV upon appraisal within 2 years of purchase).
    – Hart CO
    Apr 22, 2021 at 5:57
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    @HartCO I believe it's related to if the loans are sold to Fannie Mae or Freddie Mac, which is not always easy to know about before closing. From the Quicken Loans site: If you’re requesting removal of your PMI based on natural increases in your property value 2 – 5 years after your loan closes, both Fannie Mae and Freddie Mac require a new appraisal, and the LTV has to be 75% or less.
    – BobbyScon
    Apr 22, 2021 at 12:13

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