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Can PMI be cancelled by building equity through home improvements?
Posted on 2/21/18 at 10:47 am
Posted on 2/21/18 at 10:47 am
I bought my first home last year and only put 3% down. My loan is an FHA loan. Can the home improvements I've made (new floors, renovated kitchen and bathroom) be used to build up my equity in my home to where a new appraisal may help me achieve the 20% mark?
4
Posted on 2/21/18 at 10:49 am to Olric
Sure, if the new appraisal is higher than the original. I don't know how much weight an appraiser would give to new floors and a renovated kitchen and bathroom though.
Posted on 2/21/18 at 10:51 am to Olric
If you put less than 10% down on an FHA loan, you have to pay PMI for the life of the loan. Only way to get rid of it is to refinance through a conventional loan.
Posted on 2/21/18 at 10:55 am to RedBeardBaw
I apologize, I checked my disclosure and it was a conventional loan not FHA. Does that change things significantly?
Posted on 2/21/18 at 10:55 am to Olric
FHA is a high cost loan. So you put 3% down and then FHA charged you an upfront PMI fee of 1.75% so you really only put down 1.25%. Your stated renovations might add a little value to the house but not a a lot. I would advise you to pay extra on your house payments and when you get closer to 90% loan to value ratio to refinance your house to a conventional loan and reduce your monthly PMI. In the mean time enjoy your home ownership 
Posted on 2/21/18 at 11:14 am to Olric
quote:
Does that change things significantly?
yes. conventional loans ordinarily let you get out of pmi if you can demonstrate 20% equity through appraisal. fha doesn't allow this.
Posted on 2/21/18 at 11:25 am to lsujro
Ok that is very good to know. The previous comments have said my home improvements would not have significant impact on my appraisal but the home was built in 94 and left untouched since. Comps in the area at our time of purchase were 130 while we were able to buy at 102. At 2100 sq ft I feel as though that could be a significant impact. Is my logic sound that the more money I put into my home now the less I will have to throw away in PMI or should I use my excess funds to pay down the principal?
Posted on 2/21/18 at 11:28 am to Olric
quote:
Is my logic sound that the more money I put into my home now the less I will have to throw away in PMI or should I use my excess funds to pay down the principal?
Upgrade the house as it will likely "pay for itself"(based on the areas you are upgrading) and you get to enjoy it and get rid of flushing money down the drain with PMI payments.
Posted on 2/21/18 at 1:34 pm to Olric
I think most would tell you if you're at 20% and no longer have PMI don't pay extra principal. Assuming you don't have a terrible rate, over time that money will perform better in the market.
From a monthly payment standpoint make sure to factor in your property tax increase due to the presumed increase in value.
From a monthly payment standpoint make sure to factor in your property tax increase due to the presumed increase in value.
This post was edited on 2/21/18 at 1:37 pm
Posted on 2/21/18 at 2:08 pm to Olric
your idea is making more since now since i know the numbers . Your max LTV ratio is 95% for a refinance conventionally. I would look at refinancing the house. You bank will order an appraisal and you might see enough increase in value to get rid of PMI or greatly reduce the PMI payment. The rate will be higher but the PMI will be lower.
Posted on 2/21/18 at 5:21 pm to RedBeardBaw
quote:
If you put less than 10% down on an FHA loan, you have to pay PMI for the life of the loan. Only way to get rid of it is to refinance through a conventional loan.
Not true for everyone. I purchased my house in February of 2012 with less than 10% down and dropped my PMI after 5 years. I had to cut them a check to get below the 20%
of the original purchase price.
Now it may have changed in the last 6 years but it can be done.
Posted on 2/21/18 at 7:50 pm to Olric
I’m just finishing a major Reno plus addition that should add about 40% to my value so I’m hoping a new appraisal will wipe out pmi. I don’t want to refi because I got such a low rate last year when I purchased.
Posted on 2/21/18 at 10:53 pm to mtcheral
I put 5% down on a conventional loan. It's been 4 years. I'm about to try and refinance my house to get PMI off my loan
Posted on 2/21/18 at 10:56 pm to Rize
The law changed in 2015 or 2016
Posted on 2/21/18 at 11:03 pm to LSU5508
I thought I remembered something changing but didn’t know the dates. I got rid of mine in 2017 at the 5 year mark. I called my financial advisor because I had some stock in my company stock account that we moved from my company account to him and we hadn’t decided how we were going to invest it yet. I was paying about $250 a month on PMI and I needed $26,000 to drop PMI. He told me to write the check for the PMI because it was a guaranteed savings.
This post was edited on 2/21/18 at 11:17 pm
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