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| *Loan,banking and credit>>>mortgage insurance |
Any tips on getting rid of mortgage insurance if you owe 85%? |
I just bought a house and have a loan for about 85% of the appraised value of the house. Is there a way of getting around mortgage insurance if you owe more than 80% of the value of the house? Thanks! You can get rid of mortgage insurance a couple of different ways depending upon how long you have owned the home. If you have lived in it a year or more, you can have it reappraised and if what you owe is 80% or less of the value of the home you can request that the lender drop it. Beaware however that they don't have to technically until you pay it down to 78% LTV but most will. If you had a reason to refinance or pull cash out for some reason, you could also do a 2nd mortgage and as part of that transaction pull cash out to pay down the first mortgage to 78% LTV and then have a 2nd lien for what you need plus the other 7% to pay the loan down. Either way, the lender gets to make the decision on whether or not they will let you drop the PMI. Start by calling them first. Another benefit of getting 80%ltv or less is that you do not have to escrow for taxes and insurance anymore and can handle it yourself. Depending upon where you live, that could be a lot of money. Source(s): 25 years of mortgage experience You could take out a second mortgage and then you would not have mortgage insurance you could have another appraisal done and see if you can get to 80%, or take out a home equity loan and pay the first loan down. 1) Pay down principal until you get to 80%. 2) Make structural improvements to raise the appraised value so that the loan-to-value ratio (LTV) goes down to 80%. Note: consult with your lender first to find out what constitutes a "structural improvement" - there are some very specific requirements. Landscaping or new appliances would not be considered structural, but hardwood floors or an in-ground pool would be. 3) After two years (for most loans), a simple rise in value in your home can decrease your LTV to 80% (along with what you've been paying on the principal those two years). This type of increase in property value does not have to be due to structural improvements. Again, consult with your lender to see if this is the case. 4) As another answerer said, you can refinance. Be aware however, that despite the name, you still pay for "lender-paid" mortgage insurance. You pay for it through a slightly increased interest rate. And that interest rate does not go down when your LTV reaches 80%, unlike regular PMI which can be dropped at 80%. You may hear that interest is tax-deductible while PMI is not, but there have been changes made recently to the tax code that may allow you to deduct PMI on your tax return (if you originated your mortgage this year). The requirements I listed regarding structural improvements are standard requirements for FNMA or FHLMC backed loans (that's Fannie Mae and Freddie Mac). You say "I just bought a house..." Is your loan for 85% of what you think it's worth right now, or 85% of what you just PAID for it? For example, if you just bought it for $85,000 with a zero down payment, but you think it's worth $100,000.... I think you're out of luck - for at least a couple years. (Make sure to make all your payments on time) If you bought it for $100k and put $15,000 down, then I would suggest sending extra to the principal until you've got it down to 78% of the sales price. |
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