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Personal Finances / Buying or Selling a Home


Subject:  Re: PMI Date:  7/18/2005  12:15 PM
Author:  synchronicity Number:  87819 of 129354

Saturday, I received the letter from Chase explaining they couldn't or wouldn't remove my PMI and that I had to pay it until the loan expired (2034!). It also said that I signed a form okaying that. I had a lawyer at my closing and I definitley would have protested that if it were true.
They also said the reason being is because my loan is FHA.

As already mentioned, FHA loans have a "special" form of PMI. Normally you can get rid of PMI once you get over 20% of equity (the specifics on doing so will depend on your lender and loan). Also, non-FHA loans originated recently (in the last...3 years or so, the experts on this board will know the answer off the top of their heads) have to have PMI removed automatically once the outstanding loan balance drops below 80% of the original sale price of the home. However, with even modest annual appreciation in your home price, you will hit 20% equity long before you the loan amount is amoritzed that low.

If possible, you could refinance your loan. Interest rates remain relatively low (although they are up about a quarter point from 3 weeks ago), and you have probably had some appreciation on your property (ours is up over 6.5% from just over a year ago. Yes, I'm refi-ing, for the second time since purchasing last June).

If you have less than 20% equity currently (which is probably the case), then you can either take on PMI with the new loan and plan to get rid of it when you reach over 20% equity, or try to get a "combination" loan. In this scenario, you would get a first mortgage for 80% of your home's value, then get a second mortgage for the remaining outstanding amount. I don't know how difficult this would be as a refi; it's normally done on the original purchase.

The second mortgage has an interest rate somewhat higher than the first, as it's subordinate to the first mortgage (in the even of foreclosure, the first mortgage gets paid first, then the second).

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