Question about PMI insurance?
We refinanced our mortgage less than a year ago and got a 30 year fixed at 3.25%
It was a $631,000 Streamline loan. However, we are being charged about $600/month in PMI insurance each month because we did not have 20% equity at the time of refinancing.
Now, our home has appreciated to about $775k bringing us close to 20% equity. However, our lender (Chase) informed us that they will not consider a new appraisal until we have paid 60 months of PMI.
I want to know if this is legal. We are in California, and have good credit.
- ?Lv 67 years agoFavorite Answer
30 year fixed FHA loans with case numbers assigned prior to 6-3-2013 required the Mortgage Insurance Premium to be paid for at least 60 months, per the link below to the HUD website. Your only option to eliminate Mortgage Insurance prior to that is to refinance to a conventional program for no more than 80% of current appraised value.
Conventional loans with PMI have no minimum number of payments required to cancel. They will require to cancel if your balance reached 78% of the original appraised value and your payments are up to date, or if you produce an appraisal that is acceptable to the lender indicating your current balance is no more than 80% if current appraised value.Source(s): Licensed Loan Officer in Ohio
- AnonymousLv 77 years ago
Per the below, I think you're going to have to refinance, and pay for a new appraisal, to prove the appreciation in your home, in order to show that 20% equity.
When Can You Cancel Your PMI? Under the new law (for loan transactions made after July 29, 1999) you can request that your private mortgage insurance (PMI) be cancelled when either of the following two conditions are met:
When, based on the original amortization schedule, the principal balance of the mortgage reaches 80 percent of the original value of the property; irrespective of the outstanding balance on that date; or,
When, based on actual payments, the principal balance reaches 80 percent of the original value of the property.
How Can You Cancel Your PMI? Many loan servicers will agree to cancel mortgage insurance when the homeowner sends them a written request. First, fill out the PMI worksheet in this Guide to determine if you qualify to stop your coverage. Send a letter by certified mail to your loan servicer. You could start savings hundreds of dollars per year!
Once the 80% criteria is met, you can request to cancel your PMI by making a request in writing to the loan servicer. You must have a good payment history on the mortgage. In addition, you need to provide evidence to the servicer, spelled-out by the servicer when the original request is made, that the property has not declined below the original value. You must also demonstrate that there are no liens against the property.
When is cancellation automatic? Your mortgage servicer must terminate your PMI when, according to the original amortization schedule, the outstanding balance is first scheduled to reach 78 percent of the original value of your property. You must be current, however, on your mortgage payments of the PMI will continue until you are up-to-date. If the mortgage is judged to be high-risk at the time of the original transaction, the mortgage servicer may extend the PMI requirement to no later than the midpoint of the amortization schedule. High-risk is determined in accordance with guidelines published by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). If not cancelled by you, your PMI will be automatically terminated as outlined above so long as your are current on your mortgage payments.
Other Important conditions:
Initial transaction date: This law only applies to transactions that were completed July 29, 1999 or later.
Good payment history. The new PMI law looks at the 24 months prior to the PMI cancellation date (according to the amortization schedule). During the first 12-month period, the homeowner must not make a payment 60 or more days past due. During the second 12-month period, the homeowner must not make a payment 30 days or more past due.
Original value. The term original value is the lesser of the original sale price or the appraised value at the time of the original transaction.Source(s): http://www.ahahome.com/mem/resources/top10/drop_pm... http://www.realtor.com/home-finance/mortgages/how-...
- acermillLv 77 years ago
Of course it is legal. READ your refinance contract documents. Rest assured that such requirement is clearly documented in your refinance contract. Your option now ? Refinance AGAIN with a different lender who may NOT require that PMI, based upon another appraisal.
- Todd CLv 47 years ago
I take it that you have an FHA loan? If so, they are correct. You need to pay for 5 years before you can cancel PMI. They will also most likely have you obtain an appraisal on the home to confirm it's value. I don't know how you are getting the new value but I can almost assure you that the appraisal will be lower.
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- RobLv 77 years ago
sorry u legally stuck until they allow u to get out.
read that Contract - u signed.
California 'appreciation' isn't worth much in housing loans
industry.. the banks keep getting shafted because of it.Source(s): builder