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PMI removal on a previously self occupied now a rental property

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rated:
My wife and I own a house in GA.  We bought the house in 2007 and we lived there until April 2014.  We were under while we refinanced it 2013 and a PMI was added, we went ahead with the refinance since the rates were attractive.  Total borrowed amount was 190K at that time.  We did upgrades to the kitchen in 2014.  Properties in the surrounding area have appreciated and a similar property has been sold for 300K recently based on what zillow.com reports.

From 2014, since we had to move out of town due to my work we have been leasing it out.  Now are we eligible to remove the PMI, if the appraisal turns out to be greater than 20% of the borrowed amount.  The mortgage company seems to have restriction on removing a PMI for a property that is a rental.  Will this rule affect us?  If I ask them the same question that i have here will the mortgage company force a restructure on our current rate since it is no longer self occupied.  Appreciate your expert advice.  Thanks.

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rated:
Needs more details.

1. What's your current mortgage terms?
2. How much equity do you have in the property?

Applying for a refi for an investment property, which your home will be classified as, carries a higher interest rate and requires a larger down payment/equity. Any savings in the removal of the PMI would be wiped out by the higher interest rates.

rated:
speedracer714 said:   Needs more details.

1. What's your current mortgage terms?
30 year fixed @ 3.625%
2. How much equity do you have in the property?
The mortgage company lists on my account page that I have about $123,851 equity in the house.

Applying for a refi for an investment property, which your home will be classified as, carries a higher interest rate and requires a larger down payment/equity. Any savings in the removal of the PMI would be wiped out by the higher interest rates.
I am not looking to refinance, if I request for PMI removal on the current mortgage will it be rejected because it is no longer self occupied.

rated:
devilsskull said:   
I am not looking to refinance, if I request for PMI removal on the current mortgage will it be rejected because it is no longer self occupied.

Early PMI removal rules vary by loan terms and/or loan servicer policy. This is a question to ask your loan servicer and/or inspect your mortgage contract.
(Not anything about non-owner occupied, just if you can remove PMI early and what their requirements are.  There is no reason to volunteer the "It's now a rental" information unless they ask or state as a requirement)

You seem to indicate that you already asked them this and they told you "no", though....

rated:
If they've been renting it since 2014, the lender probably knows. They'll have current insurance info and that should be a fire only/landlord policy now. If not, maybe they don't know devilsskull, but that should be next on your to-do list, op. Cost is probably similar and you'll eliminate a pretty good reason for the insurer to deny claims.

I haven't had PMI under the current practices, but it does sound like it'll depend on what your loan docs and lender say. But they shouldn't force a refi, that's only about PMI. The property was owner occupied when you took the loan. You should check your loan documents, because depending on your definitions of 2013 and 2014, you may be close to some minimum occupancy requirement that you agreed to. I haven't heard of any penalty or other enforcement action on that clause - it may be sufficient that you fully expected in good faith to live there for at least 6 or 12 months at the time of the loan.

rated:
devilsskull said:   My wife and I own a house in GA.  We bought the house in 2007 and we lived there until April 2014.  We were under while we refinanced it 2013 and a PMI was added, we went ahead with the refinance since the rates were attractive.  Total borrowed amount was 190K at that time.  We did upgrades to the kitchen in 2014.  Properties in the surrounding area have appreciated and a similar property has been sold for 300K recently based on what zillow.com reports.

From 2014, since we had to move out of town due to my work we have been leasing it out.  Now are we eligible to remove the PMI, if the appraisal turns out to be greater than 20% of the borrowed amount.  The mortgage company seems to have restriction on removing a PMI for a property that is a rental.  Will this rule affect us?  If I ask them the same question that i have here will the mortgage company force a restructure on our current rate since it is no longer self occupied.  Appreciate your expert advice.  Thanks.


1) how the heck do they know it's a rental now?

2) I believe it's federal law that PMI must be dropped when you pay it down to 78% LTV (based upon the original purchase price, not the new value).

rated:
Bend3, yes the insurance policy is a rental policy.  Will the terms of the loan be available on the HUD statement.

I checked through the docs and realized the re-financing was completed in Aug 2012 and at the time property appraised value was 200K (100K below our original purchase price ).  Pay-off owed to the previous lender was 200K. We borrowed from the new (current) lender 190K and put in 10K of our own money to complete the re-finance.  With this re-finance a PMI was added. Right now payoff amount stands at ~$170K.

Rascott, identifying a rental is easy in my circumstance.  Once the appraiser comes to revaluate he can look at FMLS data and see the property was listed for a lease.

rated:
devilsskull said:   Bend3, yes the insurance policy is a rental policy.  Will the terms of the loan be available on the HUD statement.

I checked through the docs and realized the re-financing was completed in Aug 2012 and at the time property appraised value was 200K (100K below our original purchase price ).  Pay-off owed to the previous lender was 200K. We borrowed from the new (current) lender 190K and put in 10K of our own money to complete the re-finance.  With this re-finance a PMI was added. Right now payoff amount stands at ~$170K.

Rascott, identifying a rental is easy in my circumstance.  Once the appraiser comes to revaluate he can look at FMLS data and see the property was listed for a lease.

  
That means your "down payment" is only at 15%.  You can either put in an additional ~$14k to force the lender to remove PMI or refinance as an investment property.

Also, look at the clause in your mortgage on how long your home needs to be owner occupied.  Since you bought it in 2007 and refinanced in 2013, chances are you've met the requirement for primary resident (usually 1-2 years).

rated:
If the house is worth 200k and you owe 170k why do you think they will remove PMI? That's only 15%, you need 20%, if you can get it to be appraised at 220k then you are golden and they 78% rule will force them.

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forbin4040 said:   If the house is worth 200k and you owe 170k why do you think they will remove PMI? That's only 15%, you need 20%, if you can get it to be appraised at 220k then you are golden and they 78% rule will force them.

It was worth 200k in 2012....he thinks it's $300k now. It's the lender's discretion to drop PMI based upon new appraisal...the 78% rule is based upon the original value when the loan was taken out....not current value.


OP, as mentioned....you can either refi as an investment property.....or pay down the balance to $156k.

Probably best to pay it down if possible, as you are looking at 4-4.25% on a new 30 yr refi as a rental.

How long do you plan to hold onto this house?

rated:
Planning to hold the house for another 3 to 5 years.

I check load documents, it states the following

AFFIDAVIT OF OCCUPANCY

Applicant(s) hereby certify and acknowledge that, upon taking title to the real property described above, their occupancy
status will be as follows:

Primary Residence - Applicant(s)shall occupy, establish, and use the Property as Applicant(s) principal residence within
60 days after closing and shall continue to occupy the Property as Applicant(s) principal residence for at least one year
after the date of occupancy, unless Lender otherwise agrees in writing, which consent shall not be unreasonably withheld,
or unless extenuating circumstances exist which are beyond Borrower’s control.

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