Hot answers tagged

57

Private mortgage insurance protects the lender if you stop making your mortgage payments. It does not benefit the borrower, aside from the fact that many lenders require it if your down payment isn't large enough. Paying for PMI is essentially paying for insurance to protect someone else's investment - if you're not required to do it, there is no possible ...


24

The best way to understand insurance policies in general is to consider who gets paid, and under what circumstances. Simply put, PMI policies pay your lender. The condition under which they pay is if you default, and the bank is not able to recover the balance of the loan. If you buy a house for $100,000 with $10,000 down and a $90,000 loan, and then you ...


22

Here's some good information: http://www.nolo.com/legal-encyclopedia/private-mortgage-insurance-pmi-30108.html The Act says that you can ask that your PMI be canceled when you've paid down your mortgage to 80% of the loan, if you have a good record of payment and compliance with the terms of your mortgage, you make a written request, and you show that ...


21

There are times that the simplest explanation (or analysis) is best. You show that, for a time, the PMI is $1812/yr. And it's the cost you will incur by sending $15,000 to the student loan instead of using it as a downpayment. 1812/15000 is 12%. The loan is already costing you 4% (I know, 3.899, a rounding error), so in effect, that $15,000 is costing 16%. ...


18

Short answer: It probably makes sense to avoid the PMI (Private Mortgage Insurance), but it ultimately depends on how probable it is that you are unable to pay the monthly installments with/without the extra savings. Long answer: While i am not an expert on the specifics of the US mortgage market (I presume the question pertains to US), it seems that a ...


14

Here is what the Consumer Financial Protection Bureau has to say about the matter (I have added emphasis to a few key words here and there). The link is taken from the first comment on the question which was written by Moderator JohnFx, Request PMI cancellation The Homeowners Protection Act gives you the right to request that your lender cancel PMI when ...


12

Yes. Other posts here have asked similar questions, the 78% is automatic based on the original amortization. To be clear - on the date you closed, you could have looked at the amortization table and seen that at year x month y it hits 78%. If, via early pre payments of principal, you hit it sooner, the appraisal is required.


8

If this is your primary residence, it is not true. As specified in the Homeowners Protection Act: At 80%, if your account is in good standing, you can show that the value of the property has not declined, and you can show that there are no other liens on the property, you can request in writing for PMI to be removed. At 78%, PMI must be removed ...


7

I was recently looking over the paperwork on my mortgage and it has a clause in it similar to what US Bank is telling you. On the date that the mortgage is scheduled to reach 78%, PMI is automatically dropped. If you reach that percentage earlier, you can request that it be dropped, but the bank has the option to require an appraisal (at your expense) to ...


7

I'd need to find my other post here on PMI, but the point I'd bring here is that (a) the PMI is an adder on the entire balance due to the $10K shortage. So $900 expense on the $10K, and (b) the question of whether the bank will be willing to drop PMI if you are that one payment. PMI is only dropped automatically when you get to be 80% level due to natural ...


7

You don't have PMI, you have MIP. FHA loans are different than conventional loans. Their paragraph explains it pretty well, they use the sale price or appraised value when you bought it and will not consider new appraisals. So you'll be paying MIP until LTV reachse 78% based on original price/appraisal amount, which will happen on the original schedule by ...


6

First, you are reading that document correctly, but it's not 78% of original mortgage. It is actually 78% of original home value. For example, if the home was valued at $100K when you bought it and you received a $90K loan, PMI must be removed when you owe $78K, not 78% of $90K. To make matters worse for the bank, they missed the required timing to drop ...


6

Usually, if you want to remove PMI prior to the regularly scheduled fall-off, you will need to pay for a new appraisal. The reasons for this are: (This point is strictly conjecture:) From the bank's point of view, requiring this extra hoop to jump through means less people will do it and/or wait longer before they do, leading to slightly higher profit for ...


5

As MrChrister says, it all depends on the actual contract. As a general rule, when you get PMI, you are paying premiums for private mortgage insurance, not additional interest, and the monthly premium stays the same (just like your monthly mortgage payment) till the amount still owed on the mortgage reduces to x% of the purchase price, where x is usually ...


5

In October 2016 four changes were made to the mortgage rules stress tests [*] for qualification now apply to everyone, not just those with less than 20% downpayment to get government backed mortgage insurance, the house must cost less than 1 million (many properties in Toronto and Vancouver cost more), you must have a credit score over 600, and your ...


5

You're right that federal law does require termination for PMI at 78%--however, as with many laws, there are exceptions. 12 USC 4902 requires the cancellation of "private mortgage insurance" on or after the "cancellation date," which 12 USC 4901 defines as the date that the mortgage reaches 80% LTV (assuming no reductions in the initial value of the ...


5

There are two reasons I can think of, but they both boil down to the reason that lender will give you a mortgage with PMI, and won't approve a loan without it. Assuming the lender requires PMI for all mortgages with less than a 20% down payment: If you can't come up with enough cash for at least a 20% down payment, you can either get the loan and pay the ...


5

If we get a loan from the bank for $250,000 to purchase a home valued at $315,000 will they require us to provide a 20% downpayment or pay for private mortgage insurance? You can use gifted equity as a down payment. For a conventional loan if the down payment is 20% or higher it can all come from a gift, if it's less than 20% then only some of it can ...


4

If you reduce the home loan from $90K to $80K you would thus reduce this interest rate from 3% to 2% (without the PMI) thus saving you $900 in interest (from the original $90k). If on the other hand you paid off the $5000 @ 10% you would be saving $500 on interest. So up front it looks more advantageous to reduce the home loan from $90k to $80k, but is this ...


4

Paul, I've got to agree with JBarker; the fact that 12 months was mentioned in the rule does give the lender an out. They would argue that good payment history is legally defined as being over a minimum 12 month period. After all who's to say that you won't default in the 8th through 12th months? I'd say ride the storm until that first year is past and ...


4

Even with my comment, I see this as paying 1/8% more ($22/mo) to avoid PMI ($174) so yes, C is the winner. The question is staying put is a complex one, more so than the A/B/C. Any non-mortgage debt at all? Is your emergency fund fully funded? (What ever than means to make you comfortable) Are you funding your retirement accounts? There's value in ...


4

This is quite understandable behavior on their part. By your own admission you probably don't meet the threshold. Is it any wonder they want the PMI to continue?


4

The disadvantage is the risk of spending money on the appraisal, and missing the magic cutoff value by just a few dollars. How confident are you that you will get an appraisal at 79%?


4

The Homeowners Protection Act of 1998 lays out the minimum standards for mortgages in relation to PMI cancellation. There are two ways it can be cancelled: automatic, and borrower-requested. Automatic is when it reaches 78% of the original value of the property - at that point, the bank must cancel PMI, regardless of the current value or any other ...


4

Calculate how much you will end up paying total in each case, and compare. The "end" here is when you have both paid off the high-interest debt and payed down the mortgage to PMI removal. The numbers you want to look for are: - how much did you pay in interest on the loans by the time they were paid off? - how much did you pay for PMI by the time it was ...


3

In regards to the legal recourse, no there is none. Also, despite your frustrations with Citi, it may not be their fault. Mortgage companies are now forced to select appraisers (essentially at random) through 3rd party Appraisal Resource Companies (ARCs). This randomization mandate from the government was issued in order to combat fraud, but it is really ...


3

FHA insured loans must 'go hand in hand' with PMI, because the FHA element is the insurance itself. The FHA isn't actually giving you a loan, that's coming from a lender; instead, the FHA is insuring the loan, at some cost to you - but allowing a loan to folks who may not be able to afford it normally (lower down payment requirements and a somewhat cheaper ...


3

mhoran got right to the heart of it. There really is no relationship between the government appraisal and the one obtained for your mortgage at the bank. On the government question... I own some rental property in Utah County near BYU (I see your profile says you're in Utah), and so I went to the Utah County tax assessor's website to see what they might ...


3

There is no relationship between the government appraisal and the mortgage appraisal. In some parts of the United States that is general advice, in other parts of the US by definition they will never be equal. In some jurisdictions the government appraises every year in other places every three years. In some jurisdictions the maximum increase or decrease ...


3

There are few different types of MI you can choose from, they are: Borrower-Paid Monthly (this is what most people think of when they think MI) Borrower-Paid Single Premium (you may have QM issues on this) Lender Paid Single Premium Split Up-front and Monthly The only way to determine which option will ultimately cost you less is to come up with a time ...


Only top voted, non community-wiki answers of a minimum length are eligible