Can I cancel PMI if I've done home improvements?

Question

If I had a 100% loan for $100,000 and made $20,000 worth of home improvements within the first year, can I get my lender to cancel PMI?

Answer 1

Doubtful, but review your loan docs for direction.

If you got this loan recently, the answer is most likely "no." Mortgage insurance can't be cancelled until the LTV reaches 80%, but you have to request it in writing. Even then, the improvements may not make the home appraise high enough. MI should automatically cancel at 78% LTV. FNMA guidelines now prevent you from improving the property, reappraising it and then dropping the MI. Wanted to do this myself on a personal residence and it wouldn't fly. Too much fraud and every lender is running scared.

Answer 2

It depends. PMI stays on your mortgage until you have 20% equity in your home. At the 20% mark you have to call and request that it be taken off and if you don't it will automatically be taken off when you have 22% equity. It also depends on the loan program for example FHA loans have a minimum of 5 years of MI insurance premiums. If your loan is not FHA what type of improvements did you make? If they are cosmetic improvements this will not improve the value but if you increased the size of the home or something like that it might be possible. I just recently refinanced a customer that did a 100% loan last year and their property value in their neighborhood had went up tremendously which allowed us to remove the PMI so it can happen but this is unusual. You can always get an appraisal done at your own expense and if your value has went up 20% you can contact your lender to remove the PMI but there is not a guarantee. Good luck.

Answer 3

It is possible, but you'll have to see.

The reason is that spending $20,000 does not equate to an increase in equity. For instance, it is true that in some situations you can spend $2,000 in landscaping and imporve the value of the house by $5,000, but you can spend $20,000 on a poool and impove the value by only $5,000. So it depends. lenders are especially careful right now for accepting changes in property values if it is less than 12 months since the last appraisal.

Two things are working against you right now. One is that in many markets around the country, property values are decreasing due to this being a buyer's market. Also with that, many appraisers are being warned they need to be more conservative when they make appraisals. So there are some dampening effects on property values right now.

The best way is to get a new appraisal. If possible, try to get the same appraiser who did the original appraisal for your loan. Make sure you provide the appraiser with a complete report on all repairs and remodeling done to the property since the last appraisal. See what comes up. If the new appraisal comes out at $120,000 or more, then take that appraisal and the remodeling information to your lender as proof of the increased home value and request cessation of PMI.

It will cost you about $250-$400 for the appraisal, but if it comes out all right, then it will save you more.

If it comes up short, try again in 6 months.

Answer 4

Call your lender and they will explain the parameters that may be in place in order to cancel the PMI. You may have to get an appraisal, property values in some areas have gone down, and not all home improvements increase the value of property, so the lender will most likely what to be sure of the current loan to value.
Hope this helps and good luck!

Answer 5

LOL Funny question just think about it. PMI ..definition extra insurance that mortgage companies REQUIRE from home buyers who purchase their homes with 100% ffinancing. Now if you would have gotten 2 loans 80/20 then initially you would not be required to have pmi. Only way to get rid of pmi is if you had put that 20k towards your mortgage instead of doing repairs. So no I don't believe that would be possible sorry

Answer 6

By law, the lender must cancel MI when the LTV off the original home value reached 78% under most circumstances. There is no law governing cancelation under other circumstances, but most lenders will consider it after two years if there have been no late payments and a new appraisal shows the LTV is now 80% or below.

It is worth calling the lender, but the answer will likely be no.

For more information about MI, including cancelation, go to http://www.privatemi.com (mortgage industry group web site) or http://www.smartermi.com (mortgage insurance company web site with consumer information).

Answer 7

Just because you put in $20K does not mean your house value went up $20K. You do not get $ for $ on the value of your house. You will have to show a 20% equity in your home with an appraisals. Look at it like this the typical seller anticipates that the home they bought with no money down, all seller paid closing costs, and a 4.75% 3-year ARM in mid 2005 will now sell for approximately 70 - 85% above what they paid for it. It should be inherently obvious, even to the most casual observer, that this person is suffering from americandreamatosis, which is the unreasonable assumption that profits naturally follow from an investment level that is near or equal to zero or Theory of Homeowner Anticipation, or the Brass Light Switch Cover Phenomenon. This typically occurs when homeowners have made slight modifications to their home, usually in the form of said light switch covers or new vinyl bathroom flooring, pergo and the homeowner thinks this will create a high level of return on their investment. This theory is one that constantly evolves due to the fluid nature of new products available to the homeowner such as Pergo, Home Depot Two-Pack Builder's Grade light fixtures, and television shows like "Flip This House." You will need to pay for an appraisal $300-$500 and see what happens.

Answer 8

Most lenders remove the PMI after you've paid timely on the loan for 2 years. Call your lender and speak to them, every lender is different

Answer 9

Your loan papers should spell out when you can cancel PMI.
You may be asked to obtain an appraisal to support value.

Answer 10

Here in SC you can cancel your pmi if you owe 80% or less than the value of the property.