Canceling PMI
All these questions about PMI got me thinking. How can you cancel PMI on investment property. Seems that several of my lenders told me that I could not just have it reappraised to cancel PMI. Does anyone know if canceling pMI with a new appraisal that shows 80% LTV is by lender or is it across the board for all lenders.
Thanks
Brenda
Everybodies PMI is different and situation is different. Higher credit scores can generally pay a higher intrest rate in lou of PMI. In some cases PMI can be higher monthly than if you just went with a higher rate. Look at this the next time you go to get a loan. I went through this yesterday and I saved about 50/month by going with the higher rate. Generally at 80% value you can request that PMI be dropped if payments have been made on time and your credit is im good standing. Everybodies lender is differnet so you just have to check.
When you have 80% into the deals have your mortgage broker or banker order an apprasial as if you are going to refi.
Take this apprasial as well as a copy of a pre-approval of your new loan to your existing bank and demand them to drop the PMI or your'll refi.
I've seen this work on nearly every occasion. I'm no expert so many others have more hands on experience than I do.
I have had talked to people who have cancelled there pmi before, and if I am not mistaken then the information explaining the terms and conditions of your PMI should be in your loan documents somewhere- possibly in an addendum to your note. So check your docs, and call your lender they may just tell you how to do it. -If that doesn't work tell them your going to refi. If you have a good payment history etc. then they may want to keep you and help you out of it or streamline refi you into a comparable loan without pmi..
Also the people who got out of it were able to do so after being in the loan for a period of time, then getting a new appraisal and sending it with a request to there lender to stop the pmi charges.
I am not sure how it would work on a loan where multiple factors went into the requirement for pmi. the only choice may be to refinance if you can get better terms elswhere.
Hope that helps
Evan
[ Edited by baytitleguy on Date 10/15/2004 ]
Quote:ncboater is right plus you can usually deduct interest not pmibaytitleguy,
PMI payments for your investment rental property are valid expenses to claim on your Schedule E. PMI is a non-deductible personal expense for your primary residence.
The problem with taking a higher interest rate in lieu of PMI is that you can never have the interest rate reduced. You never get out of this higher payment until you pay off the loan. At least PMI can be cancelled after your loan amount drops below 80% LTV.
This observation is only important to the investor who plans to hold the property. The flipper probably should not care.
Quote:Does anyone know if canceling pMI with a new appraisal that shows 80% LTV is by lender or is it across the board for all lenders.Federal law mandated PMI cancellation procedures for all conforming loans originated after July 1999. The law excluded FHA insured loans.
It is optional for loans originated prior to the law, but most lenders have adopted a uniform approach to PMI cancellation for all their conforming loans.
The federal law mandated that after some period of principle loan reduction (do not remember the exact percentage) then PMI must be removed. I believe the federal law does not stipulate that lenders must remove PMI if a new appraisal shows the LTV at 80%. I want to remove PMI without having to wait for 20% pain on the principle of the original loan amount.
Very true NewKid. I don't buy and hold so a point higer rate for a year or so makes no difference to me. If your going to buy and hold than rate is always the key.
Quote:
On 2004-10-14 23:34, bgrossnickle wrote:
The federal law mandated that after some period of principle loan reduction (do not remember the exact percentage) then PMI must be removed. I believe the federal law does not stipulate that lenders must remove PMI if a new appraisal shows the LTV at 80%. I want to remove PMI without having to wait for 20% pain on the principle of the original loan amount.
The law does require lenders to permit PMI cancellation for conforming loan when property appreciation makes the loan amount less than 80% of the new appraised value. Contact your lender to discuss their PMI cancellation process.
Sometimes lenders can be a pain in the rear when it comes to cancelling PMI... I don't know why, but my brother tried to cancel his PMI once his LTV went down to 80% - his paperwork said that he needed to request it in writing to the following address... Well after he did that - he called and they said they had no record of the letter... Then he faxed it to a representative... Then they needed an appraisal... Then they need more paperwork... Then something else... I don't think he ever got it relieved... He ended up selling the place to upgrade anyway so he didn't have to worry about it for too long...
Anyway - something to think about!
Good Luck!
[addsig]
Newkidd,
Your right, I should have specified primary residence re: pmi non-deductability-- obviously when investing all of our costs including pmi are deductable..-
I'd like more information on the PMI being tax deductible, as my CPA told me last year that it wasn't, and he's a real estate investor that used to work for the IRS. He said all I could do was to pay down the properties so I could drop it.
As an aside, last night, I was looking over the payment notice I get in the mail each for a house, and it spelled out on it exactly what the criteria were for dropping PMI, so you can go look there for a certain answer to your question.
Insurance is a permitted expense for your rental property on your Schedule E. PMI is insurance.
No, I would not think it matters too much whether the property is occupied or vacant. Mine happened to be tenant occupied at the time, but the appraiser only needs to see that there are no major defects. The appraisal was based largely on comparable sales.
I had to write a letter to Countrywide to get the ball rolling. They collected the appraisal fee then ordered the appraisal.