I am starting my own business and need start up cash. I bought my home last year for 209000, but it was way undervalued. Several smaller homes in my neighoorhood have sold for about 230000. The principal remaining on my loan is 205000. If I take out a home equity loan for 40K and can get my house appraised for 250K while reducing my principal to 200K I can eliminate PMI and roll that money (and then some) into the payment for my home equity loan. Will my mortgage company accept the home equity loans company's appraisal (it should be done by an outside company). Also, the reason I layed out so much information is because I am also fishing for any advice I can get on this situation. Thanks for any input at all!
2006-06-15 16:39:35 · 4 answers · asked by mitchent86 4 in Business & Finance ➔ Renting & Real Estate
Not to contradict one of the other answers here, but PMI is applied when the first mortgage is over 80% loan to value (not 70%). In simple terms, if your home is worth $100,000 and your first mortgage is $80,000 or less, you should have no PMI.
To have the PMI removed, there are some options. First, you should call the mortgage company and ask them whether or not they require a full appraisal (some companies only require a BPI - Broker's Price Opinion, which should cost less than $100). If they do, ask them for a list of the approved appraisers in your area. You should then be able to go to your local lender for the HELOC (Home Equity Line Of Credit) and ask that lender to use one of the appraisers on the list.
Another option would be to ask your lender to have the appraisal done (then they can remove your PMI), and then go to your lender with that appraisal. If the appraiser who does the job is on their list, it should be easily usable.
Third option, but probably most expensive, would be to go to your lender (with your current loan information) and ask what benefits there are for you refinance. This could work to your benefit if you either have a higher interest rate (your rate will go down on the first mortgage with a lower loan to value ration) or if you have an ARM (Adjustable Rate Mortgage) that will be adjusting soon.
Most importantly, don't forget that the HELOC or second mortgage you get will have a higher interest rate. In most cases, though, it's a small bit higher for total payments than your first mortgage plus your PMI. You make up for this with the interest deductions you can take on the second at the end of the year. Make sure you ask your accountant or CPA first to get all of the details on this.
Best of luck to you - you seem to have your ducks in a row, and your plan should work well for you.
Sean
2006-06-15 17:44:59 · answer #1 · answered by trblmkr30 4 · 3⤊ 0⤋
When you have the equity appraisal done, you can also forward that information to the mortgage company, and specifically request that the PMI be rolled back, if not eliminated.
As a general rule of thumb, PMI is required by most mortgage companies for the first 30% of the original loan value. So, at 209, your mortgage company is thinking you'll be required to carry PMI until you're at 146 or so. Doesn't hurt to ask, though.
Good thoughts on raising the capital - I like it. Good luck! - Stuart
2006-06-15 23:47:29 · answer #2 · answered by Stuart 7 · 0⤊ 0⤋
Mortgage companies don't like to tell you and they sure as heck WILL NOT REMIND YOU that after 3 years, the PMI, if no late payments, and all in good standing, will be taken off if you send a letter to the company asking them to take it off and proof of no late payments. All you ever have to do is call and hopefully get a REAL LIVE PERSON, inform them its been 3 years and you want the PMI dropped. They will tell you exactly what to do, pretty much what I said above and that should be it. But you make sure that you talk to someone that really knows what you are talking about. Get their name, department, date, time of day that u call them, incase it doesn't go through the 1st time. You will have proof. Always keep an extra copy of what u send them and when you send the letter and proof to them, send it where someone has to sign for it and you get a receipt back in the mail stating that they received your info. Keep it with your papers. Make sure you check to see if PMI has been taken off. Keep on top of it until it is. Good Luck!
2006-06-16 00:10:37 · answer #3 · answered by kategiz 2 · 0⤊ 0⤋
I am currently purchasing a house for 170,000 I am putting 5% Bringing it to 161,500.
We havent closed yet and I got the appraisal from my lender for 212,900. Am I still going to be required to pay the PMI or should I question it?
2014-10-02 13:25:19 · answer #4 · answered by Steve 1 · 0⤊ 0⤋