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RandySavage
Member since May 2012
3788 posts
| Home addition/PMI (Posted on 2/22/13 at 11:20 am)
Considering a home addition which would make it so that I had enough equity in the home to get below the 78% mark. Would making the addition allow me to get the PMI removed or are there some rules that change if you add on?
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Newbomb Turk 
Navy Fan
perfectanschlagen
Member since May 2008
9809 posts
| re: Home addition/PMI (Posted on 2/22/13 at 11:31 am to RandySavage)
Are you FHA?
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AUtigerNOLA 
Auburn Fan
New Orleans, LA
Member since Apr 2011
5093 posts
| re: Home addition/PMI (Posted on 2/22/13 at 11:32 am to RandySavage)
If you haven't had your home for at least 5 years you can't avoid PMI. It's mandatory. Not sure if this answers your question though.
Eta: this is for FHA.
This post was edited on 2/22 at 11:33 am
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Sigma
Auburn Fan
Member since Dec 2005
990 posts
 Online
| re: Home addition/PMI (Posted on 2/22/13 at 12:08 pm to RandySavage)
quote:
Considering a home addition which would make it so that I had enough equity in the home to get below the 78% mark. Would making the addition allow me to get the PMI removed or are there some rules that change if you add on?
We just did the same thing and the appraiser as well as the bank didn't value our improvements anywhere near their cost. Like in the 20% range. I thought we were a shoe in to avoid PMI just paying closing costs but now we'll have to bring a decent amount to closing.
In your case if you are not refinancing you will need an appraisal to prove your home's new value. I would check with your mortgage holder first so that there aren't any surprises like not approving the appraiser, etc.
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OldSouth 
LSU Fan
Folsom, LA
Member since Oct 2011
4192 posts
| re: Home addition/PMI (Posted on 2/22/13 at 12:23 pm to Sigma)
quote:
We just did the same thing and the appraiser as well as the bank didn't value our improvements anywhere near their cost. Like in the 20% range.
Why's that?
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Sigma
Auburn Fan
Member since Dec 2005
990 posts
Online
| re: Home addition/PMI (Posted on 2/22/13 at 12:33 pm to OldSouth)
quote:
Why's that?
Refi in 2009, appraised at 185K.
Since, we:
replaced vinyl flooring with ceramic tile in kitchen, bathrooms
added deck, screened-in porch
new windows
new roof
new gutters, downspouts
new carpet in bedrooms
added landscaping
Spent 45K, appraisal last month came back 191K.
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ItNeverRains
LSU Fan
Franklin, TN
Member since Oct 2007
4568 posts
| re: Home addition/PMI (Posted on 2/22/13 at 12:41 pm to Sigma)
quote:
re: Home addition/PMI (Posted on 2/22/13 at 12:33 p.m. to OldSouth) quote: Why's that? Refi in 2009, appraised at 185K. Since, we: replaced vinyl flooring with ceramic tile in kitchen, bathrooms added deck, screened-in porch new windows new roof new gutters, downspouts new carpet in bedrooms added landscaping Spent 45K, appraisal last month came back 191K.
Do you think this is accurate? Do you not have any comps in last 6 months to back your reasoning?
This post was edited on 2/22 at 12:41 pm
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Sigma
Auburn Fan
Member since Dec 2005
990 posts
Online
| re: Home addition/PMI (Posted on 2/22/13 at 12:54 pm to ItNeverRains)
quote:
Do you think this is accurate? Do you not have any comps in last 6 months to back your reasoning?
The comps seemed to be reasonable. We went through an appraisal dispute but I couldn't find any better comps than those the appraiser used. There is just a disconnect between the renovation costs and their added value to the home. I'm just hoping that when the time comes to sell, we will recoup more of the difference. I have spoken to an agent in our neighborhood and this will likely be the case.
At the end of the day, it sucks forking over the money, but it's just less we have to borrow.
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LSUGUMBO 
New Orleans Saints Fan
Shreveport, LA
Member since Sep 2005
3802 posts
| re: Home addition/PMI (Posted on 2/22/13 at 1:07 pm to Sigma)
quote:
Refi in 2009, appraised at 185K.
Since, we:
replaced vinyl flooring with ceramic tile in kitchen, bathrooms
added deck, screened-in porch
new windows
new roof
new gutters, downspouts
new carpet in bedrooms
added landscaping
Spent 45K, appraisal last month came back 191K.
We did the same thing between 2010 & 2012.
2010 Appraisal- $296,000
added 16x22 on to our current 10x22 slab patio and pergola covering the whole addition, changed the flooring in the living/dining from carpet to hardwood
2012 appraisal- $296,000
I looked on both appraisals, and they both noted that I had a patio, and assigned that patio a value of $5,000.
When they appraise for a refi, they don't take into account all those things that add value like new roof, gutters, patio, etc. If you look on your appraisal, they probably didn't even note all of your improvements since they didn't add any sq ft to the house, and that's basically all those refi appraisals are based on- sq ft vs comps.
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tigermoney
LSU Fan
Member since Oct 2008
296 posts
| re: Home addition/PMI (Posted on 2/22/13 at 2:30 pm to LSUGUMBO)
i would think only adding living area square footage would increase the value ... like enclosing the garage into living area
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RandySavage
Member since May 2012
3788 posts
| re: Home addition/PMI (Posted on 2/22/13 at 7:52 pm to tigermoney)
We bought for 185k in 2009.
Refi a couple of months ago and currently owe 167k. Refi didn't require an appraisal so I don't know what it would appraise for now.
After our potential addition we would add over 400 sq. ft. including a bathroom, mud room/laundry, and bedroom and by that time, about 18 months from now will owe about 153k or so off our original loan.
Surely between adding a 50k-60k project onto our home and paying off 30k already we could get an appraisal high enough to get rid of PMI. At least I hope.
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MikeBRLA
LSU Fan
Baton Rouge
Member since Jun 2005
8710 posts
| re: Home addition/PMI (Posted on 2/23/13 at 8:45 am to Sigma)
In your case other factors come into play other than the improvements you made. The main one being time and the market downturn that took place. It's not as though you had an appraisal done right before and right after the improvements a month apart.
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tiger94gop
LSU Fan
GEISMAR
Member since Nov 2004
1333 posts
| re: Home addition/PMI (Posted on 2/23/13 at 6:56 pm to RandySavage)
The only thing that will make a difference is sq ft and bath count. Also be aware that if you are in a subdivision adding sq footage is like putting rims on your car, nice but not worth any more money. With a house, if you want to avoid PMI, you are doing it wrong. If you want the additions or upgrades, do them. If you want to drop PMI, put that money to principal and refi. If you go through a broker and go conventional,it is far better than FHA, then you should be better of. If you are in a cookie cutter subdivision, the addition isn't worth it for value. If you want it for quality of life, just do it, if you plan on being there value won't matter.
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RandySavage
Member since May 2012
3788 posts
| re: Home addition/PMI (Posted on 2/24/13 at 8:17 pm to tiger94gop)
quote:
If you want the additions or upgrades, do them
I need to additions to stay in the house with a growing family. I'm hoping that dropping PMI will be an added bonus resulting from the addition.
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foshizzle
LSU Fan
Member since Mar 2008
25068 posts
| re: Home addition/PMI (Posted on 2/24/13 at 8:26 pm to RandySavage)
I had to read the thread title twice before realizing you hadn't misused "edition". 
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tiger94gop
LSU Fan
GEISMAR
Member since Nov 2004
1333 posts
| re: Home addition/PMI (Posted on 2/25/13 at 1:21 pm to RandySavage)
You really would need to consider what kind of upgrade to determine what will increase your value. Sq footage and bath count is the only real bang for your buck. If you are not in a subdivision, then the appraiser can pull from a reasonable distance, use like sized comparables, etc. But You will not get a $ for $ increase no matter what you do.
Your question is how are you paying for the addition. If you are planning to finance it, then there are several things to consider. Dropping PMI is one, but you realy need to research what your improvements are and are htere homes in the area that are valued significantly higher than yours. You could spend a ton of money on kitchens, baths, etc. Unless you do a ton of the work yourself,you may be better off selling and looking for a bigger home, let someone else take the hit for the improvements.
Consider this; a remodel is generally more expensive, unless it is just cosmetic. If you add sq footage, you could spend more than $100-$120 a sq ft for the addition and improvements if a contractor does it. Will your house appraise for that now?
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RandySavage
Member since May 2012
3788 posts
| re: Home addition/PMI (Posted on 2/25/13 at 4:49 pm to tiger94gop)
The thing is we really like our area and the housing in said area is very limited. Very few houses go up for sale and when they do they are usually out of our price range.
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tiger94gop
LSU Fan
GEISMAR
Member since Nov 2004
1333 posts
| re: Home addition/PMI (Posted on 2/25/13 at 5:44 pm to RandySavage)
You still haven't told me how you were going to pay for the improvements. Do some research, just be aware that nothing gives you a $ for $ return. If what you say about your neighborhood is true, it is probably older. Unless you are in areas where the land is extremely valuable: Garden District in Baton Rouge, Garden District in N. O., then your overall value will not increase for what you are going to spend.
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RandySavage
Member since May 2012
3788 posts
| re: Home addition/PMI (Posted on 2/25/13 at 7:47 pm to tiger94gop)
quote:
You still haven't told me how you were going to pay for the improvements.
Pay about 35-40 up front finance the other 10-15k with a home improvement loan.
quote:
If what you say about your neighborhood is true, it is probably older.
It is, it's a designated "historic district".
quote:
hen your overall value will not increase for what you are going to spend.
I don't need it to increase the 50-55k it's going to cost but surely I'll recoup a decent amount that adding a significant amount of square footage and a full bath right?
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