Refund of PMI?

Question

Two years ago, my brother bought his home with 10% down and PMI. He recently took out a HELOC for a $100k, which now has an open balance of $15k.

Two questions -
1. Is there anyway to get a refund on some of the pmi payments, considering his equity is way over 20%?

And

2. When cancelling PMI do the lenders/pmi companies look at the combined loan-to-value simply on the oustanding balance of the HELOC or on the amount of the total line of credit?

He has about 40% equity in his home when basing the equity on the outstanding balance on his HELOC. Conversely, when calculating the equity using the total available credit on the HELOC his equity is closer to 20%.

Answer 1

Re: question 1 -There is no way to get a refund on the PMI as stated in your PMI clause, PMI insurance is for the lender's sake if a borrower defaults normally within the first 2 years.

Re: question 2 - The only thing lenders look at is the loan to value (LTV) not to exceed 80% to go without having to pay PMI -if you refinance.

Therefore the fact that your brother took out a line of credit (HELOC) has no bearing at all with having the PMI removed. Your brother has two options in order to remove the PMI.

The first is that he can have an new appraisal made and a letter requesting to have PMI removed from the lender which normally requires the loan to value to be at least 78 or (22% equity), or option 2 is to refinance completely which requires a new appraisal and therefore when the lender recognizes the amount of equity in the property is 40% they will by default remove PMI once your refinance loan is funded and recorded. It would be worth to do the refinance if his payments will decrease significantly as well as combining the 15K that is owed on the line of credit, otherwise simply locate a certified appraiser in your region and pay them to do the appraisal.

Answer 2

1) No refund of any paid PMI premium can be refunded

2) The only lien that will be ratio qualified is the first lien. This must be 80% or less of the value of the home. The HELOC is a second position lien and not factored into the consideration.

Submit a certified appraisal to the lender and they will eliminate the PMI if the ratios are met. You may want to call the lender for a list of approved appraisers and a formal review of their process.

Here is some additional info on PMI.

Answer 3

Most lenders require you to have 2 - 3 years of on-time payments before you can get PMI removed. He'll have to get an appraisal from a licensed appraiser (at his own expense) and submit that to the lender with a request to have the PMI removed. If they accept the application to remove the PMI then the mortgage payments will be reduced accordingly. There is no way to have any PMI payments refunded.

The holder of the first mortgage is only interested in the loan to value ratio on their paper. If you have 20% or more equity there, they will be more likely to drop the PMI. The HELOC has nothing to do with it. It's a junior lien to theirs so has no affect on their position.