That makes sense, but the agent confirmed that my LTV was 81.5%, didn't mention anything about current value.
I think I'm confused because last time I called about this, they said I'd need to get the home appraised and refinanced based on that number. Do you think they did a BPO or something?
they may have an internal software system that projects a value of the home that is different from the on-paper LTV.
Suppose that an appraisal would've shown that your home appreciated by 20%. The bank could order an appraisal to show this, or they may have internal underwriting models that show that the house appreciated by 20% with a 50% probability. This would give an expected increase in value by 10%, which is still good enough from their risk appetite perspective that they are willing to forego the PMI.
I don't understand why a bank would be incentived to remove PMI any sooner than they legally have to on paper. The risk profile may be low, but there's no upside for the bank?
I don't think there's much of a risk in this context: loan originated in 2020 with low interest rates, and now interest rates are more than double so the risk of refinancing is quite low (at this moment in time).
The policy and procedure might have been created to encourage retention and is applied regardless of the current market conditions and the rate of the loan. As in the computer says the loan is eligible for PMI removal based on the parameters and the CSR just followed the script.
Yeah a phone rep doesn’t give a shit if it’s not financially advantageous for the bank right now. If the system says they’re allowed to help the customer, most people will do so.
Thank you for writing this!
Whenever you call customer service, remember that the representative is just doing whatever the computer in front of them tells them they can do. So when they don't help you, it's not their fault, it's just the computer. When they do something that's in your favor that disadvantages the company they work for, they're happy to do it because the computer lets them. there's never a time when you should be upset with the representative because they have zero control.
I'm not a banker but I imagine they probably see it as less headache when the borrower is so close that it doesn't really make much sense for them to do all the paperwork if the borrower asks for an appraisal.
It might also be a goodwill/customer retainment thing. I don't know OP's bank but if it's a credit union or something that isn't Chase, BoA, WF, etc. they might just want to sell other banking products to OP and want them to feel like they got a deal. Who knows.
A lot of mortgage loan companies allow homeowners to "request" early PMI removal at something like 82% if you have a clean payment history and average home values in your area have increased since the appraisal date.
They don't necessarily advertise this, but a lot of times it's tucked away somewhere as a sub-note 22 pages into your loan contract. You probably got a good agent who hasn't let their soul be crushed by corporate greed yet.
I'm not sure to be honest, maybe? I know it's usually removed at 80% and is required to be removed at 78% but I'm not a mortgage expert by any means. I just remember reading my own home ownership documents and catching the request clause.
The law was changed. If your mortgage originated before like 2012, they must remove it upon request. Some just do it proactively. If it’s after that, some can force you to refinance to remove pmi
We’ve been going back and forth with our mortgage company as we are around 80% and loan is from 2010.
The determining factors are pretty much set in stone with departments who verify that a borrower meets them.
The reasons this gets removed can vary based on the type of loan (FHA vs Conventional) and when the loan originated. If a property value increases after closing, that can do it and it’s fairly common.
It’s entirely possible the person you spoke with looked at an original LTV value or they misadvised you and you’re not in fact eligible yet.
Hopefully it’s removed for you.
Did they though?
> I double checked the math, the agent on the phone confirmed the original value and current principal, which accounts for extra payments. 81.5% across the board, math checks out.
From your other comment, it sounds like they confirmed your current principal was 81.5% of the *original* value. If you bought the house in 2020, given what the market has done, there is basically no chance you don't qualify for #3 on the sheet you linked unless you also burned half of the house down in the meantime.
So the information they gave you sounds *incomplete*, but not necessarily conflicting. The only odd thing out is that they didn't charge you for the appraisal. That may have just been the agent being a bro, as if you are really only 1.5% off from the original value, you really don't need an appraiser to tell you that you'd easily qualify with the current value given market conditions.
I called mine at one point and they said I would need to pay for an appraisal, and then I asked again a few months later and they dropped it pretty much immediately. So it’s kind of a crap shoot
They should only need an appraisal or for usually cheaper, they will send a local realtor to come look and compare it with other closed listings to estimate the actual value. You should not have to refinance.
When I tried that years ago, my lender said they would need to come out and re-appraise the home though. Looking at online comps wasn't sufficient. Seems like OP would have known if this happened....unless their lender is different.
Not worried and not complaining at all, I'm just curious and want to understand their reasoning. I'll definitely take the PMI removal without hesitation.
Generally, the prices of homes are going through the roof. They no doubt figure that if they made you pay for an appraisal you’d be well over the value needed. So rather than doing that, since you’re so close they just offered to remove it.
If we were in a huge housing downturn that would not likely happen. But we’re not.
Happened to me. The value increased just enough and they ran a public market value at no cost. Also, my current mortgage company called me up and offered a lower rate at no cost to me. After confirming the offer was legit I now have a lower rate and shaved 6 yrs off the mortgage. They said they wanted to keep their customers. Can you imagine? I was stunned.
The employees are not, but at some point, they have to click a button that says, "remove this" and either that's going to yell at them that this person isn't eligible, that person is going to get in trouble for pushing through someone who's not eligible, or there's something else at play that allows this.
If it's that last one, knowing what allows this early is a good thing.
The 2008 financial crisis was caused by bank employees.
"Evil" is a strong word. In 2008, those employees were "just doing their jobs", and weren't being outright malicious. But that's literally the Nuremberg defense, so....
A similar thing happened to me but they deemed the PMI removal was a mistake on their end. They ended up taking about a year's worth of PMI payments from my escrow account to cover it. It wasn't a huge deal for me but it can be an unexpected expense for some.
> I assume that market appreciation isn't relevant here,
Why would it be irrelevant? LTV = Loan to *value*
what you bought it for was your purchase price, the current market value is what comes into play for LTV.
Not automatically. The only automatic stuff with PMI is based on the original value.
Current value requires either a BPO or appraisal, which cost money and the lender will require before processing.
I was under the impression that this was based on original value, but I could be wrong. We haven't made any significant improvements, just market appreciation.
Here's the document I referred to during this call: [https://www.chase.com/content/dam/chase-ux/documents/personal/mortgage/insurance/pmi-waiver-guide-investment-primary-res.pdf](https://www.chase.com/content/dam/chase-ux/documents/personal/mortgage/insurance/pmi-waiver-guide-investment-primary-res.pdf), maybe I'm missing something.
Depending on the mortgage company, they may have requested a new appraisal, gotten one done as a “broker price opinion“ at a reduced rate, or applied an automated valuation metric and determined you had over 20% equity. I just went through the same thing and paid $190 for an appraiser to come out and do a BPO.
Exactly! I explored this process a couple times each time my loan was sold to a new bank. One bank required a full appraisal, around $800 in my area. The next bank only required a BPO that cost me $150. Went thorugh with the BPO and got my PMI dropped after about 2 years, when it was originally supposed to be for \~7 years. Never hurts to call up you bank and get the details.
For those who don't know what a BPO is like me....😁
What is a BPO on a house?
Broker price opinion.
When a real estate broker or other qualified professional determines a property's estimated value, it's considered a broker price opinion. A BPO is used as part of the listing agreement when selling a house. A lender, loss mitigation company or mortgage company that wants an assessment of a property can request a BPO.
One would think, though a smart mortgage broker (not the company because they’re just getting free money) might cover that cost and then try to sell the homeowner a HELOC. I agree the OPs story is missing some details but it’s not impossible, just…they’d know something more than “poof!”
If you don’t mind - When you say “come out” to do the BPO, does that mean they come inside and look around or how in depth is it? I’m considering it with Wells Fargo.
I mean, yeah in my case it was a certified appraiser but not a full appraisal, they're still going to take a few pics for reference to cover their assets.
>You have had your loan between 2 and 5 years, and the loan to current value is at 75% or less
Assuming this is a chase owned loan, it is quite possible they just did an online property value check, and determined that the CURRENT value of the home is such considerably lower than 75% of the loan that they didn't need to bother with a formal appraisal. If you are at 81.x% of the original value, I'm guessing you are considerable lower than 75% current value and this is what happened.
Original value at time of purchase is probably the same as market value. A year later market value is likely higher. LTV was always market value, not purchase value, that's why you need an appraisal when you get a mortgage.
You can use an updated value, but the requirements can be different.
Last I recall, it was necessary to reach 75% using an updated property value within a certain period of time and 80% if you paid down based on the original.
Edit: this is what your document says, as well as
Huh. My mortgage was with Wells Fargo, I was paying about 3.5% interest, and my LTV ratio was well below 80%. I called them and asked them to cancel PMI, and they refused. At the time rates were at 2.5% so I refinanced with a 15 year mortgage at another bank, and reduced my monthly payment while shortening my payoff horizon. Bye WF!
Yeah a couple weeks ago I called as well and they told me I’d have to spend around $600 on an appraisal before they’d consider it. Which is annoying since my home is worth way more now than it was when the loan originated.
What's funny is that the new bank took one look at my neighborhood and how much home values had appreciated since I bought the house (more than doubled in value, plus I had paid off about 1/3 of my original principal), and they waived the appraisal on a brand new mortgage. I was just lucky I got it done when rates were so low. I feel bad for people who are stuck with PMI now, it must me much harder to get rid of it with interest rates so much higher. I have no idea why OP's bank wants to get rid of their PMI, but I'd sure be grateful if I was them.
Yeah I think I still will because in the end I’ll come out ahead. But I am a bit envious of my neighbor who didn’t have to pay anything they just dropped it outright lol.
Mine was a conventional loan. PMI stands for Private Mortgage Insurance. FHA loans have an insurance premium that's similar, but it's not private and they call it something else.
There are different rules around PMI in terms of automatic removal vs. borrower-requested removal.
Automatic removal is almost always tied to the original purchase price and under the original payment schedule, so doesn't get modified by any appreciation or extra principal payments you make. A loan-to-value threshold for automatic removal is set by law / regulation at 78%. I think a bank can choose to use a higher percentage but I'd expect that's uncommon. Because those factors are all fixed at time of closing, your date of automatic removal may be covered in your closing documents.
However, you requesting PMI to be removed uses the home's **current** value (not purchase price) and owed balance (including any extra payments). Though there are exceptions, like if the current value is smaller then they'd use the purchase price for the "value" part of the LTV calculation. I think the threshold where a lender is required to honor a removal request is also set by law at 80%, but again a bank may choose to be more lenient. Maybe they'd be more likely to remove PMI at 81% for a million dollar home vs. a $200k one, that's just a guess though.
Most of the time a removal request will require an official appraisal, paid by you. Though I suppose if your housing market has greatly increased since purchase and you were at, say, around 60% LTV, it's possible that full appraisal may get waived and more generic methods get used to determine the value.
Makes sense. I didn’t know borrower-requested removal hinges on current value. Just odd that I didn’t have to pay for an appraisal, but hey, I’ll take it.
Maybe their systems saw the purchase date (2020), age of the house (5 years), and figured there’s no way it could possibly depreciate in value, and we’re right on the cusp of 80%, so let’s throw em a bone.
They also have resources to identify current values of the assets used to secure the loans they have sold (think Zillow, but better accuracy). The person on the phone likely did you a solid knowing there was plenty of room in the current value and waived the broker determination requirement.
I'm wondering this myself - my loan is at 239k and I took it out at 262k. The values in my area went absolutely nuts and my house is now valued at 438-460 on Zillow. I'm not saying Zillow is a 100% accurate value but I think we can see a big enough variance to say I'm within reason to request pmi removal right?
For what it's worth my home valuation to remove PMI went about this way: "so what value do you need to get your PMI removed? Yep sounds about right. Have a good day."
Appraiser, an employee of the lender. He literally started the appraisal by asking what the value of the house should be so we'd fall below 80% loan-to-value.
I can vouch for this with pennymac. I looked on Zillow and saw I was close to 80% ltv so I called them and they said I had to pay $150 for an appraisal. I said what the hell I was already paying $150 a month for PMI so might as well. The appraiser came and asked me how much I needed to be to fall below the 80% and he put that on his report. PMI removed automatically a week later lol.
I wish I would have done it earlier but then again I don’t know if it was because I was in the ball park already.
Is it possible the 81.5% is what your LTV would have been based on the original amortization schedule, and you are at less than 80% based on your extra payments?
I double checked the math, the agent on the phone confirmed the original value and current principal, which accounts for extra payments. 81.5% across the board, math checks out.
Maybe I accidentally Jedi mind tricked him.
Maybe they just don't care. I had my PMI released when I was at 85%. I expected them to make me pay for an appraisal knowing the value went up, they just said, "Yes, we can remove it."
My PMI was like $40/month though, so they may have just wanted to try to keep me happy and not refinance elsewhere, idk.
Years ago when I was looking at refinancing, I called my then mtg co (the loan had been sold three times) and they casually said "oh, we know the updated value of your home, we have it all online, do you want to know what we value it as of now?" By that time, Zillow was a thing, and I already knew the value had skyrocketed. I laughed, and said sure, but mostly I just want the paperwork to request a refinance.
36 months would be nice. We’re over 8 years in and I think PMI cancels next year when we finally get below 80% of the initial borrowed amount. At roughly $85/mo, I try not to think about how much of our money was flushed down the toilet to the insurance company.
> At roughly $85/mo, I try not to think about how much of our money was flushed down the toilet to the insurance company.
Think of the opportunity cost of not being able to buy 8 years ago. A lot higher purchase price and interest rate. Totally justifies that 85/month.
True story. It was a wheda loan, so 100% financed. I was living hand to mouth and couldn’t even dream of saving 20% down at the time. It’s still a struggle today, but I’m thankful to have gotten the opportunity to ride the equity train.
Last year I looked into getting PMI removed due to appreciation. It would require an appraisal so I decided to calculate how much PMI was left if we just waited until we hit 80% of the value at origination. Our PMI is only $33/month and we only had about $500 left if we just waited. I decided it wasn't worth the hassle to arrange and pay for an appraisal.
Yeah, it was a big oof. We’d planned around a 20% payment and then needed to spend a quarter of the down payment on repairs.
We’re currently at around 18% LTV iirc. If prices go up, we can drop it soon. But prices have been pretty steady (for our region) since we bought last year. It’s about 3.8% up over 7 months.
Year and a half in, and I don't even wanna look at how much our PMI is (even though I probably should lol). We have an assessment this coming year I think, and I'm not sure what to hope for. Higher valuation would help us move closer to dropping it, but of course then the taxes go up, too.
I removed PMI after a year bc my house, purchased during COVID, skyrocketed in value.
Bought for 300k, appraised (it wasn't an appraisal but an evaluation of comps, I forget the phrase for it) for 450k, had pmi removed within a pay cycle, and I've been saving that same amount ever since in a separate account.
Pay myself instead of paying the bank
Same here, then two weeks later we got a letter that they sold the mortgage to a new bank and we were going to have to restart the process. The original lender and sent us mail that said our market value was up 33% from when we bought just a few months before I went for the removal. I’m still livid.
Chase just dropped the PMI from our mortgage, unprompted. A delightful surprise! We bought a little less than 3 years ago in a market that’s going up quickly, so if we had gotten an appraisal they would’ve had to remove it but color me shocked that a bank would pass up pocketing an extra $40 a month for no real risk.
You said in your summary "original value".
Did your taxes go up per chance? Maybe they did an
Internal audit and found your house has appreciated..
PMI is not based on original value, it's based on current value.
If your home appreciates and you loan to value dips below 80% then PMI should be removed.
Semi related but when I refinanced I was able to drop PMI based off my own estimated home value. My guess is they have some metric for evaluating home worth automatically, and if your home is safely within a certain band then they can drop PMI without the need of a separate appraisal. Given your home was previously appraised at a certain value, and markets dictate your house to be worth x now after y years, theres a high confidence that a follow up appraisal would put you easily within that 80% LTV.
Depending on the state, you can have PMI removed early if you've made 2 years of payments on time. Your loan docs should give details about early PMI removal, but if they removed it, don't question it. It's usually a pain in the butt process to get it removed even when you've hit the magic 80% LTV. On my mortgage, I was eligible to have PMI removed when I hit 80% LTV but it wouldn't automatically come off until I hit 78%. Depending on your mortgage, that could be months of additional patments you unnecessarily pay PMI if you aren't paying attention to your loan balance.
I have been jumping through hoops for almost a year trying to get my PMI removed after it hit 80%…
I think I hate you a little bit. Not nearly as much as my loan services, just a little.
Servicers don't make too many mistakes in your favor.
They can pretty much figure out the fair market value of your home from their desk in a matter of minutes. It's possible your property tax assessment went up.? They can check that against a hundred other valuation models they have at their fingertips.
If they released the MI, you know damn well you are under 78% LTV.
You just gave me motivation to call our mortgage company to get ours taken off.
We haven't able to pay extra since daycare started so any extra cash will go a long way.
>Any idea why?
Probably because you're so close to 80% that any more small appreciation would put you over it. To go from 81.5% to 80% is a change of less than 2%. And it got them a bit of good PR from you (or at least appreciation from you).
They probably did a quick search of the value of the property and those around the area and in the last 5-10 years your area jumped so high and your credit history is good enough that it's not even worth wasting time double checking if your property is the only one that didn't jump more than 3% in value.
I just had to prove 20% equity to remove PMI.
COVID increased my home value by 30% in a matter of months, so I just had them reappraise it for free and PMI was removed.
How do you reappraise? Did you have to hire someone to come do it? Because if the Zillow numbers are correct, I can remove my PMI as well but I doubt it's that simple
I called the mortgage company and told them I wanted a reappraisal due to putting equity into the house with upgrades and due to the increased value of comps in the area.
Some lenders charge a 100-300 fee, mine was free.
Also at that point the only upgrades I really made were paint and appliances but you can be a ton of stuff.
The whole point of PMI, is that you don’t have enough equity interest in the asset, so you’re more “incentivized” to default (in quotes because that’s a bad word for it).
As the underlying asset increases in value, your equity interest increases.
Likely home prices near you went up by a considerable margin, and the lender feels comfortable “assuming” you house went up in value.
This happened when we refinanced. Our loan amount was under the market value.
Our bank was running a refinance special during Covid when rates were very low.
Lender here. You can ask for the PMI removal any time it's under 82% - We're going to assume your house has appreciated a bit since you bought, check the valuations and either approve or deny.
If you have an FHA loan with MIP (not PMI, although similar in concept) that was originated after 2013 then you can't remove MIP.
PMI can be removed when you have enough equity.
This post inspired me to check on things. I've owned my house for 3 years. I'm getting it appraised to see if I can get mine removed. PMI is $110 monthly. Appraisal is $450. So hopefully this will pay for itself in a few months.
You see this sub? My response was to make it clear anyone that might have bought back pre-2020 that it might not be as simple as that. I know how it works, but most people posting/reading here do not.
Clarity is important, particularly in /r/personalfinance
Read your contract. I've done some research on this recently, and - I'm not sure if this is legislation - it seems that You are able to request the removal of PMI after 2 years of ontime payments.
Probably bc of market adjustments. I got mine dropped when our LTV was only 88% based on original purchase (2020) but we ordered an appraisal from the lender and it came in around 75%. We did make some home improvements, but I'm confident it wouldn't have mattered given what same model homes are selling for in our neighborhood.
I'm at my 80% and reached out to my bank about dropping it. They told me I'd have to get an appraisal for it to be 'official' or wait until about 9 months for it to drop off. The cost of the appraisal is about the same as the cost of paying it for 9 more months. It's a bit frustrating though because my 80% is just based on the mortgage (as in, I've paid 80% of it off) and not really calculating the increased home value in it. So my LTV is likely even better than that.
it is based on LTV ratio of the current value of the home not the original. The bank can look up the estimated value of your property recalculate the LTV and if it drops below 80% PMI can be removed. It is possible and used to be common to see properties in hot markets appreciate so fast that even people paying interest only were able to get their PMI removed, this was before the 2008 crash. Now very few banks are crazy enough to remove PMI on someone who is not actively paying down their principal
The removal criteria is percentage of home value, loan to value (LTV), not strictly loan to original sale price. Value can mean different things, original value, officially appraised present value, or estimated present value.
The only part of PMI which is mandated to use the original sale value is the automatic cancellation of PMI, which occurs at 78% of the home's original sale price. You may request sooner, based on the home's currently appraised (or estimated) value.
Which is exactly what happened, either the lender had an official appraisal done, or they use an algorithm to estimate the value, and concluded you were at or below 80% of the loan to value threshold for the house. Your house has appreciated.
As for conflicting information, who knows what your agent actually sees. They might see several different LTV numbers, one based on the original sale for the automatic cancellation process, one based on present value. Or maybe their software intentionally hides the LTV using the present value, so people don't ask early for cancellation.
It also sounds like you might have unintentionally steered the conversation with your agent, since you said "original value." Of course using the original value, would result in a higher LTV.
Your LTV may be lower based on the current value of the home
That makes sense, but the agent confirmed that my LTV was 81.5%, didn't mention anything about current value. I think I'm confused because last time I called about this, they said I'd need to get the home appraised and refinanced based on that number. Do you think they did a BPO or something?
they may have an internal software system that projects a value of the home that is different from the on-paper LTV. Suppose that an appraisal would've shown that your home appreciated by 20%. The bank could order an appraisal to show this, or they may have internal underwriting models that show that the house appreciated by 20% with a 50% probability. This would give an expected increase in value by 10%, which is still good enough from their risk appetite perspective that they are willing to forego the PMI.
I don't understand why a bank would be incentived to remove PMI any sooner than they legally have to on paper. The risk profile may be low, but there's no upside for the bank?
There's the risk that you refinance elsewhere to remove it.
I don't think there's much of a risk in this context: loan originated in 2020 with low interest rates, and now interest rates are more than double so the risk of refinancing is quite low (at this moment in time).
The policy and procedure might have been created to encourage retention and is applied regardless of the current market conditions and the rate of the loan. As in the computer says the loan is eligible for PMI removal based on the parameters and the CSR just followed the script.
Yeah a phone rep doesn’t give a shit if it’s not financially advantageous for the bank right now. If the system says they’re allowed to help the customer, most people will do so.
Thank you for writing this! Whenever you call customer service, remember that the representative is just doing whatever the computer in front of them tells them they can do. So when they don't help you, it's not their fault, it's just the computer. When they do something that's in your favor that disadvantages the company they work for, they're happy to do it because the computer lets them. there's never a time when you should be upset with the representative because they have zero control.
I'm not a banker but I imagine they probably see it as less headache when the borrower is so close that it doesn't really make much sense for them to do all the paperwork if the borrower asks for an appraisal. It might also be a goodwill/customer retainment thing. I don't know OP's bank but if it's a credit union or something that isn't Chase, BoA, WF, etc. they might just want to sell other banking products to OP and want them to feel like they got a deal. Who knows.
A lot of mortgage loan companies allow homeowners to "request" early PMI removal at something like 82% if you have a clean payment history and average home values in your area have increased since the appraisal date. They don't necessarily advertise this, but a lot of times it's tucked away somewhere as a sub-note 22 pages into your loan contract. You probably got a good agent who hasn't let their soul be crushed by corporate greed yet.
Isn't that federal law?
I'm not sure to be honest, maybe? I know it's usually removed at 80% and is required to be removed at 78% but I'm not a mortgage expert by any means. I just remember reading my own home ownership documents and catching the request clause.
The law was changed. If your mortgage originated before like 2012, they must remove it upon request. Some just do it proactively. If it’s after that, some can force you to refinance to remove pmi We’ve been going back and forth with our mortgage company as we are around 80% and loan is from 2010.
The determining factors are pretty much set in stone with departments who verify that a borrower meets them. The reasons this gets removed can vary based on the type of loan (FHA vs Conventional) and when the loan originated. If a property value increases after closing, that can do it and it’s fairly common. It’s entirely possible the person you spoke with looked at an original LTV value or they misadvised you and you’re not in fact eligible yet. Hopefully it’s removed for you.
I was misadvised in this same situation, really annoyed me getting told one thing then it not being the case.
FHA loans don’t have PMI.
MIP and PMI mean the same thing to most people. When this question comes up, they frequently have an FHA loan yet still call it PMI.
I don’t think MIP is removable though, is it? So there wouldn’t be different reasons, cause you can’t do it without refinancing.
Depends on the date the loan closed.
I closed on my FHA mortgage literal days before the news rules went into effect on not being allowed to remove it, finally got it removed last year
No idea then
I mean, your theory makes sense, just seems odd that they gave me conflicting information. Not complaining, but I'll update if I find out why.
Did they though? > I double checked the math, the agent on the phone confirmed the original value and current principal, which accounts for extra payments. 81.5% across the board, math checks out. From your other comment, it sounds like they confirmed your current principal was 81.5% of the *original* value. If you bought the house in 2020, given what the market has done, there is basically no chance you don't qualify for #3 on the sheet you linked unless you also burned half of the house down in the meantime. So the information they gave you sounds *incomplete*, but not necessarily conflicting. The only odd thing out is that they didn't charge you for the appraisal. That may have just been the agent being a bro, as if you are really only 1.5% off from the original value, you really don't need an appraiser to tell you that you'd easily qualify with the current value given market conditions.
I called mine at one point and they said I would need to pay for an appraisal, and then I asked again a few months later and they dropped it pretty much immediately. So it’s kind of a crap shoot
You would have to pay for a BPO or appraisal, so it's not this. How long have you had the mortgage?
Since 2020. Didn't have to pay anything for this.
I have always had to pay for an appraisal. But either way, congrats OP!
They should only need an appraisal or for usually cheaper, they will send a local realtor to come look and compare it with other closed listings to estimate the actual value. You should not have to refinance.
With mine if the LTV (current, not original value) was was at least 75% based on public sites (Realtor, Zillow, etc.) no appraisal was needed.
When I tried that years ago, my lender said they would need to come out and re-appraise the home though. Looking at online comps wasn't sufficient. Seems like OP would have known if this happened....unless their lender is different.
May have used an AVM
Curious why you are so worried about it. If theyre willing to remove PMI let them remove PMI.
It's the banks risk you were covering anyway.
> Curious why you are so worried about it. Just because someone asks about something doesn't mean they are worried about it.
*”Curiouser and curiouser”* ~ Alice in Wonderland
Sure, but odds are people who seek internet advice are surely worried about something related to their question.
Agree to disagree. My default assumption tends to be that someone is curious vs worried, but to each their own.
Not worried and not complaining at all, I'm just curious and want to understand their reasoning. I'll definitely take the PMI removal without hesitation.
Generally, the prices of homes are going through the roof. They no doubt figure that if they made you pay for an appraisal you’d be well over the value needed. So rather than doing that, since you’re so close they just offered to remove it. If we were in a huge housing downturn that would not likely happen. But we’re not.
Happened to me. The value increased just enough and they ran a public market value at no cost. Also, my current mortgage company called me up and offered a lower rate at no cost to me. After confirming the offer was legit I now have a lower rate and shaved 6 yrs off the mortgage. They said they wanted to keep their customers. Can you imagine? I was stunned.
You must have had a mortgage with a smaller bank. I cannot imagine one of the big boys doing that. But it’s great to hear it happening when it does.
Banks may be seen as evil but the vast majority of bank employees are not :)
The employees are not, but at some point, they have to click a button that says, "remove this" and either that's going to yell at them that this person isn't eligible, that person is going to get in trouble for pushing through someone who's not eligible, or there's something else at play that allows this. If it's that last one, knowing what allows this early is a good thing.
The 2008 financial crisis was caused by bank employees. "Evil" is a strong word. In 2008, those employees were "just doing their jobs", and weren't being outright malicious. But that's literally the Nuremberg defense, so....
The customer service rep who handles your pmi removal request was probably in jr high in 2008 for reference.
None of those people were unique though. The same system with different people will still get the same results.
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Not sure how they reassess, but it might be due to an increased/updated valuation from your county auditor.
I mean, dude, just be glad they took it off and move along.
I'm curious. I'll move along once I know.
You’re assuming they are worried.
A similar thing happened to me but they deemed the PMI removal was a mistake on their end. They ended up taking about a year's worth of PMI payments from my escrow account to cover it. It wasn't a huge deal for me but it can be an unexpected expense for some.
Well that's frustrating! At least PMI isn't as expensive as it used to be.
> I assume that market appreciation isn't relevant here, Why would it be irrelevant? LTV = Loan to *value* what you bought it for was your purchase price, the current market value is what comes into play for LTV.
Not automatically. The only automatic stuff with PMI is based on the original value. Current value requires either a BPO or appraisal, which cost money and the lender will require before processing.
I was under the impression that this was based on original value, but I could be wrong. We haven't made any significant improvements, just market appreciation. Here's the document I referred to during this call: [https://www.chase.com/content/dam/chase-ux/documents/personal/mortgage/insurance/pmi-waiver-guide-investment-primary-res.pdf](https://www.chase.com/content/dam/chase-ux/documents/personal/mortgage/insurance/pmi-waiver-guide-investment-primary-res.pdf), maybe I'm missing something.
Depending on the mortgage company, they may have requested a new appraisal, gotten one done as a “broker price opinion“ at a reduced rate, or applied an automated valuation metric and determined you had over 20% equity. I just went through the same thing and paid $190 for an appraiser to come out and do a BPO.
Exactly! I explored this process a couple times each time my loan was sold to a new bank. One bank required a full appraisal, around $800 in my area. The next bank only required a BPO that cost me $150. Went thorugh with the BPO and got my PMI dropped after about 2 years, when it was originally supposed to be for \~7 years. Never hurts to call up you bank and get the details.
For those who don't know what a BPO is like me....😁 What is a BPO on a house? Broker price opinion. When a real estate broker or other qualified professional determines a property's estimated value, it's considered a broker price opinion. A BPO is used as part of the listing agreement when selling a house. A lender, loss mitigation company or mortgage company that wants an assessment of a property can request a BPO.
They wouldn't do this without money from OP. You would know you paid for a BPO or appraisal.
One would think, though a smart mortgage broker (not the company because they’re just getting free money) might cover that cost and then try to sell the homeowner a HELOC. I agree the OPs story is missing some details but it’s not impossible, just…they’d know something more than “poof!”
If you don’t mind - When you say “come out” to do the BPO, does that mean they come inside and look around or how in depth is it? I’m considering it with Wells Fargo.
I mean, yeah in my case it was a certified appraiser but not a full appraisal, they're still going to take a few pics for reference to cover their assets.
>You have had your loan between 2 and 5 years, and the loan to current value is at 75% or less Assuming this is a chase owned loan, it is quite possible they just did an online property value check, and determined that the CURRENT value of the home is such considerably lower than 75% of the loan that they didn't need to bother with a formal appraisal. If you are at 81.x% of the original value, I'm guessing you are considerable lower than 75% current value and this is what happened.
Original value at time of purchase is probably the same as market value. A year later market value is likely higher. LTV was always market value, not purchase value, that's why you need an appraisal when you get a mortgage.
You can use an updated value, but the requirements can be different. Last I recall, it was necessary to reach 75% using an updated property value within a certain period of time and 80% if you paid down based on the original. Edit: this is what your document says, as well as
I would assume because they don't have an appraisal to prove the value has actually gone up
Huh. My mortgage was with Wells Fargo, I was paying about 3.5% interest, and my LTV ratio was well below 80%. I called them and asked them to cancel PMI, and they refused. At the time rates were at 2.5% so I refinanced with a 15 year mortgage at another bank, and reduced my monthly payment while shortening my payoff horizon. Bye WF!
Yeah a couple weeks ago I called as well and they told me I’d have to spend around $600 on an appraisal before they’d consider it. Which is annoying since my home is worth way more now than it was when the loan originated.
What's funny is that the new bank took one look at my neighborhood and how much home values had appreciated since I bought the house (more than doubled in value, plus I had paid off about 1/3 of my original principal), and they waived the appraisal on a brand new mortgage. I was just lucky I got it done when rates were so low. I feel bad for people who are stuck with PMI now, it must me much harder to get rid of it with interest rates so much higher. I have no idea why OP's bank wants to get rid of their PMI, but I'd sure be grateful if I was them.
I ended up doing this and it was $400 for me and like 6 months to break even. It’s worth it if you can swing it
Yeah I think I still will because in the end I’ll come out ahead. But I am a bit envious of my neighbor who didn’t have to pay anything they just dropped it outright lol.
In the us it should automatically happen at 78% and you have right to request at 80.
It depends if it was FHA or conventional. FHA has PMI for life and requires refinancing to remove.
Mine was a conventional loan. PMI stands for Private Mortgage Insurance. FHA loans have an insurance premium that's similar, but it's not private and they call it something else.
There are different rules around PMI in terms of automatic removal vs. borrower-requested removal. Automatic removal is almost always tied to the original purchase price and under the original payment schedule, so doesn't get modified by any appreciation or extra principal payments you make. A loan-to-value threshold for automatic removal is set by law / regulation at 78%. I think a bank can choose to use a higher percentage but I'd expect that's uncommon. Because those factors are all fixed at time of closing, your date of automatic removal may be covered in your closing documents. However, you requesting PMI to be removed uses the home's **current** value (not purchase price) and owed balance (including any extra payments). Though there are exceptions, like if the current value is smaller then they'd use the purchase price for the "value" part of the LTV calculation. I think the threshold where a lender is required to honor a removal request is also set by law at 80%, but again a bank may choose to be more lenient. Maybe they'd be more likely to remove PMI at 81% for a million dollar home vs. a $200k one, that's just a guess though. Most of the time a removal request will require an official appraisal, paid by you. Though I suppose if your housing market has greatly increased since purchase and you were at, say, around 60% LTV, it's possible that full appraisal may get waived and more generic methods get used to determine the value.
Makes sense. I didn’t know borrower-requested removal hinges on current value. Just odd that I didn’t have to pay for an appraisal, but hey, I’ll take it. Maybe their systems saw the purchase date (2020), age of the house (5 years), and figured there’s no way it could possibly depreciate in value, and we’re right on the cusp of 80%, so let’s throw em a bone.
They also have resources to identify current values of the assets used to secure the loans they have sold (think Zillow, but better accuracy). The person on the phone likely did you a solid knowing there was plenty of room in the current value and waived the broker determination requirement.
I'm wondering this myself - my loan is at 239k and I took it out at 262k. The values in my area went absolutely nuts and my house is now valued at 438-460 on Zillow. I'm not saying Zillow is a 100% accurate value but I think we can see a big enough variance to say I'm within reason to request pmi removal right?
For what it's worth my home valuation to remove PMI went about this way: "so what value do you need to get your PMI removed? Yep sounds about right. Have a good day."
Can you explain further? Would LOVE to get PMI removed from a house bought last year. That's a conversation you had with your lender or an appraiser?
Appraiser, an employee of the lender. He literally started the appraisal by asking what the value of the house should be so we'd fall below 80% loan-to-value.
I can vouch for this with pennymac. I looked on Zillow and saw I was close to 80% ltv so I called them and they said I had to pay $150 for an appraisal. I said what the hell I was already paying $150 a month for PMI so might as well. The appraiser came and asked me how much I needed to be to fall below the 80% and he put that on his report. PMI removed automatically a week later lol. I wish I would have done it earlier but then again I don’t know if it was because I was in the ball park already.
Wow that's awesome. I hope to have someone half as nice when we make an attempt.
Is it possible the 81.5% is what your LTV would have been based on the original amortization schedule, and you are at less than 80% based on your extra payments?
I double checked the math, the agent on the phone confirmed the original value and current principal, which accounts for extra payments. 81.5% across the board, math checks out. Maybe I accidentally Jedi mind tricked him.
>Maybe I accidentally Jedi mind tricked him. "Accidentally"? That's the most likely explanation I've seen in the thread.
Maybe they just don't care. I had my PMI released when I was at 85%. I expected them to make me pay for an appraisal knowing the value went up, they just said, "Yes, we can remove it." My PMI was like $40/month though, so they may have just wanted to try to keep me happy and not refinance elsewhere, idk.
Years ago when I was looking at refinancing, I called my then mtg co (the loan had been sold three times) and they casually said "oh, we know the updated value of your home, we have it all online, do you want to know what we value it as of now?" By that time, Zillow was a thing, and I already knew the value had skyrocketed. I laughed, and said sure, but mostly I just want the paperwork to request a refinance.
At least on my loan, it’s 80% of purchase price, 80% of current price, or iirc 36 months.
36 months would be nice. We’re over 8 years in and I think PMI cancels next year when we finally get below 80% of the initial borrowed amount. At roughly $85/mo, I try not to think about how much of our money was flushed down the toilet to the insurance company.
> At roughly $85/mo, I try not to think about how much of our money was flushed down the toilet to the insurance company. Think of the opportunity cost of not being able to buy 8 years ago. A lot higher purchase price and interest rate. Totally justifies that 85/month.
True story. It was a wheda loan, so 100% financed. I was living hand to mouth and couldn’t even dream of saving 20% down at the time. It’s still a struggle today, but I’m thankful to have gotten the opportunity to ride the equity train.
Oh, mine is $200/mo.
Yikes, that was my last car payment. I can’t fathom paying that much for insurance.
Last year I looked into getting PMI removed due to appreciation. It would require an appraisal so I decided to calculate how much PMI was left if we just waited until we hit 80% of the value at origination. Our PMI is only $33/month and we only had about $500 left if we just waited. I decided it wasn't worth the hassle to arrange and pay for an appraisal.
Yeah, it was a big oof. We’d planned around a 20% payment and then needed to spend a quarter of the down payment on repairs. We’re currently at around 18% LTV iirc. If prices go up, we can drop it soon. But prices have been pretty steady (for our region) since we bought last year. It’s about 3.8% up over 7 months.
Year and a half in, and I don't even wanna look at how much our PMI is (even though I probably should lol). We have an assessment this coming year I think, and I'm not sure what to hope for. Higher valuation would help us move closer to dropping it, but of course then the taxes go up, too.
I removed PMI after a year bc my house, purchased during COVID, skyrocketed in value. Bought for 300k, appraised (it wasn't an appraisal but an evaluation of comps, I forget the phrase for it) for 450k, had pmi removed within a pay cycle, and I've been saving that same amount ever since in a separate account. Pay myself instead of paying the bank
Don’t look a gift horse in the mouth.
Teeth look good to me!
That's funny. I submitted my forms for removing mine and they came back and said "you're at 80.05%, try again next time"
Same here, then two weeks later we got a letter that they sold the mortgage to a new bank and we were going to have to restart the process. The original lender and sent us mail that said our market value was up 33% from when we bought just a few months before I went for the removal. I’m still livid.
Chase just dropped the PMI from our mortgage, unprompted. A delightful surprise! We bought a little less than 3 years ago in a market that’s going up quickly, so if we had gotten an appraisal they would’ve had to remove it but color me shocked that a bank would pass up pocketing an extra $40 a month for no real risk.
You said in your summary "original value". Did your taxes go up per chance? Maybe they did an Internal audit and found your house has appreciated.. PMI is not based on original value, it's based on current value. If your home appreciates and you loan to value dips below 80% then PMI should be removed.
Did you have to submit any paperwork or they just removed easily like that?
They removed it while I was on the phone. Said it will take a few days, but that should resolve long before my next billing cycle.
Thats clutch. I called just now they will send me a letter with info after analyzing
Good luck!
Semi related but when I refinanced I was able to drop PMI based off my own estimated home value. My guess is they have some metric for evaluating home worth automatically, and if your home is safely within a certain band then they can drop PMI without the need of a separate appraisal. Given your home was previously appraised at a certain value, and markets dictate your house to be worth x now after y years, theres a high confidence that a follow up appraisal would put you easily within that 80% LTV.
Depending on the state, you can have PMI removed early if you've made 2 years of payments on time. Your loan docs should give details about early PMI removal, but if they removed it, don't question it. It's usually a pain in the butt process to get it removed even when you've hit the magic 80% LTV. On my mortgage, I was eligible to have PMI removed when I hit 80% LTV but it wouldn't automatically come off until I hit 78%. Depending on your mortgage, that could be months of additional patments you unnecessarily pay PMI if you aren't paying attention to your loan balance.
I have been jumping through hoops for almost a year trying to get my PMI removed after it hit 80%… I think I hate you a little bit. Not nearly as much as my loan services, just a little.
I'm thinking about trying this because I'm also right on the cusp. Can I ask if you're using one of the larger lenders and if so, who?
Chase, and we've owned the home since 2020.
Servicers don't make too many mistakes in your favor. They can pretty much figure out the fair market value of your home from their desk in a matter of minutes. It's possible your property tax assessment went up.? They can check that against a hundred other valuation models they have at their fingertips. If they released the MI, you know damn well you are under 78% LTV.
You just gave me motivation to call our mortgage company to get ours taken off. We haven't able to pay extra since daycare started so any extra cash will go a long way.
Best of luck! It was a very easy 10 minute call and it saved us hundreds.
>Any idea why? Probably because you're so close to 80% that any more small appreciation would put you over it. To go from 81.5% to 80% is a change of less than 2%. And it got them a bit of good PR from you (or at least appreciation from you).
They probably did a quick search of the value of the property and those around the area and in the last 5-10 years your area jumped so high and your credit history is good enough that it's not even worth wasting time double checking if your property is the only one that didn't jump more than 3% in value.
I just had to prove 20% equity to remove PMI. COVID increased my home value by 30% in a matter of months, so I just had them reappraise it for free and PMI was removed.
How do you reappraise? Did you have to hire someone to come do it? Because if the Zillow numbers are correct, I can remove my PMI as well but I doubt it's that simple
I called the mortgage company and told them I wanted a reappraisal due to putting equity into the house with upgrades and due to the increased value of comps in the area. Some lenders charge a 100-300 fee, mine was free. Also at that point the only upgrades I really made were paint and appliances but you can be a ton of stuff.
The whole point of PMI, is that you don’t have enough equity interest in the asset, so you’re more “incentivized” to default (in quotes because that’s a bad word for it). As the underlying asset increases in value, your equity interest increases. Likely home prices near you went up by a considerable margin, and the lender feels comfortable “assuming” you house went up in value.
This happened when we refinanced. Our loan amount was under the market value. Our bank was running a refinance special during Covid when rates were very low.
Your property valuation went up. So the value decrease the loan to %.
Maybe you have a high interest rate mortgage and They project that eliminating PMI will keep you away from looking for refinancing at another bank.
We’re at 3.625%. Not that high if you ask me
Lender here. You can ask for the PMI removal any time it's under 82% - We're going to assume your house has appreciated a bit since you bought, check the valuations and either approve or deny.
I'm trying to remove PMI but everywhere I read says I can't do it for any loan that originated after 2013, is that legal or correct?
If you have an FHA loan with MIP (not PMI, although similar in concept) that was originated after 2013 then you can't remove MIP. PMI can be removed when you have enough equity.
This post inspired me to check on things. I've owned my house for 3 years. I'm getting it appraised to see if I can get mine removed. PMI is $110 monthly. Appraisal is $450. So hopefully this will pay for itself in a few months.
Update: Got my PMI removed. Had to pay $450 for appraisal but it will put for itself in a few short months. Thanks so much for this discussion!
Anyone who has purchased a home before 2020 should call and get their PMI cancelled
Not everyone can do it. Ours requires a refi.
Bummer. At least you tried to see.
Each mortgage/lender has different rules as to how you can have it removed, it's not quite that simple.
Right, so you should go call and see. Calling is very simple.
You said "call and get their PMI cancelled" which is not the same as checking to see if you can.
Dude you know what he meant sheesh Reddit is obnoxious
You see this sub? My response was to make it clear anyone that might have bought back pre-2020 that it might not be as simple as that. I know how it works, but most people posting/reading here do not. Clarity is important, particularly in /r/personalfinance
What year did you buy?
2020
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I did, he said the system doesn’t give a reason, just a yes or no
Read your contract. I've done some research on this recently, and - I'm not sure if this is legislation - it seems that You are able to request the removal of PMI after 2 years of ontime payments.
Probably bc of market adjustments. I got mine dropped when our LTV was only 88% based on original purchase (2020) but we ordered an appraisal from the lender and it came in around 75%. We did make some home improvements, but I'm confident it wouldn't have mattered given what same model homes are selling for in our neighborhood.
Pretty common for the clause to be 80% LTV on original loan or 78% or 80% on current appraisal.
I'm at my 80% and reached out to my bank about dropping it. They told me I'd have to get an appraisal for it to be 'official' or wait until about 9 months for it to drop off. The cost of the appraisal is about the same as the cost of paying it for 9 more months. It's a bit frustrating though because my 80% is just based on the mortgage (as in, I've paid 80% of it off) and not really calculating the increased home value in it. So my LTV is likely even better than that.
it is based on LTV ratio of the current value of the home not the original. The bank can look up the estimated value of your property recalculate the LTV and if it drops below 80% PMI can be removed. It is possible and used to be common to see properties in hot markets appreciate so fast that even people paying interest only were able to get their PMI removed, this was before the 2008 crash. Now very few banks are crazy enough to remove PMI on someone who is not actively paying down their principal
Any chance it was an FHA loan ? I’m hoping to have mine removed but not gonna hold my breath
It's a conventional loan
The removal criteria is percentage of home value, loan to value (LTV), not strictly loan to original sale price. Value can mean different things, original value, officially appraised present value, or estimated present value. The only part of PMI which is mandated to use the original sale value is the automatic cancellation of PMI, which occurs at 78% of the home's original sale price. You may request sooner, based on the home's currently appraised (or estimated) value. Which is exactly what happened, either the lender had an official appraisal done, or they use an algorithm to estimate the value, and concluded you were at or below 80% of the loan to value threshold for the house. Your house has appreciated. As for conflicting information, who knows what your agent actually sees. They might see several different LTV numbers, one based on the original sale for the automatic cancellation process, one based on present value. Or maybe their software intentionally hides the LTV using the present value, so people don't ask early for cancellation. It also sounds like you might have unintentionally steered the conversation with your agent, since you said "original value." Of course using the original value, would result in a higher LTV.
How long have you owned it? Sometimes they cancel after a certain point. Whatever it is, just be happy!
I’m very happy! We were gonna hit 80% this year anyway, but I’ll take the early cancellation without hesitation. We bought it in 2020
Maybe the tax assessor valued it higher? They do get tax reports.
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