Should I try to drop PMI?

Anonymous · ‎10-13-2016

Backstory: Bought our house in February 2016 for $195,000. Mortgaged $185,000. Prior to our purchase seller got an appraisal that came back around $205k and our lender's appraisal was almost the same ($207, I think). House was built in the 60's and not much updating since so we proceeded to gut most of the place and rebuild using the proceeds from the house we sold where we used to live. All in all we put $90k into the house after closing.

The good:

- NOT an FHA mortgage, so no 5-year PMI requirement

- our house is a 4/2 where a majority in our neighborhood are 3/2 (the 4/2s sell FAST and have been selling above asking)

- all new floors, new electrical panel, electrical service from pole moved underground, put on a new roof (live near the beach in Florida), completely new kitchen, 1 completely new bathroom, 1 'facelifted' bathroom, new walls/ceilings where needed (not all rooms needed it), new paint throught entire interior

- houses similar to ours in size (within 10% sq footage) have been selling anywhere from $290-$360k (top end have pools, we don't)

- no damage or leaks in the hurricane last week!!

The bad:

- we don't have a pool, whereas most of our neighborhood does

- A/C system is at about 80-90% of it's useful life

- insulation in the attic is practically non-existent along with old, leaky ductwork

- since we didn't do a full gut, some of the wiring is older (but passes inspection)

- The portions of fence that we own need replacing

- Landscaping is kind of crappy...not sure if this plays any role in appraisal or not

Is it worth getting an appraisal right now to see if we can hit $231,000 (original mortgage is $185k, $231k * 80% = $185k)? Granted our PMI is only about $90/mo of our payment, so we're not talking huge bucks here. Should I wait until the A/C system craps out and we're forced to get a new one, at which time we'll get new ductwork and insulation? Should I wait until we can do a full remodel on the 2nd bathroom?

StartingOver10 · ‎10-13-2016

@Anonymous wrote:
Backstory: Bought our house in February 2016 for $195,000. Mortgaged $185,000. Prior to our purchase seller got an appraisal that came back around $205k and our lender's appraisal was almost the same ($207, I think). House was built in the 60's and not much updating since so we proceeded to gut most of the place and rebuild using the proceeds from the house we sold where we used to live. All in all we put $90k into the house after closing.

The good:
- NOT an FHA mortgage, so no 5-year PMI requirement
- our house is a 4/2 where a majority in our neighborhood are 3/2 (the 4/2s sell FAST and have been selling above asking)
- all new floors, new electrical panel, electrical service from pole moved underground, put on a new roof (live near the beach in Florida), completely new kitchen, 1 completely new bathroom, 1 'facelifted' bathroom, new walls/ceilings where needed (not all rooms needed it), new paint throught entire interior
- houses similar to ours in size (within 10% sq footage) have been selling anywhere from $290-$360k (top end have pools, we don't)
- no damage or leaks in the hurricane last week!!

The bad:
- we don't have a pool, whereas most of our neighborhood does
- A/C system is at about 80-90% of it's useful life
- insulation in the attic is practically non-existent along with old, leaky ductwork
- since we didn't do a full gut, some of the wiring is older (but passes inspection)
- The portions of fence that we own need replacing
- Landscaping is kind of crappy...not sure if this plays any role in appraisal or not

Is it worth getting an appraisal right now to see if we can hit $231,000 (original mortgage is $185k, $231k * 80% = $185k)? Granted our PMI is only about $90/mo of our payment, so we're not talking huge bucks here. Should I wait until the A/C system craps out and we're forced to get a new one, at which time we'll get new ductwork and insulation? Should I wait until we can do a full remodel on the 2nd bathroom?

Check with your mortgage servicer that you have now to see their procedure for dropping PMI before you do anything else. There are internal guidelines that the servicer follows for dropping PMI. They may say they require X years (2 is common on a conventional). If your servicer requires two years before they will drop the MI, then naturally you need to wait - OR to refinance with another lender. Refinancing costs more. It may be worth it to refi but if you are only saving $90/month, it would take quite a while to recoup your closing costs IME.

As far as value goes: believe it or not, pools don't give you that much extra value in a resale even if it costs $50k to $100k to install. The appraisers usually add $10k to $15k, depending on the neighborhood, for the value of a pool. Appraisers will compare a house similar to yours with a pool and without a pool to see how much buyers are willing to pay for a pool in your neighborhood. This is referred to as 'paired sales' and is one of the best ways to determine the value for an individual element like a pool. I'm in S FL and am very familiar with appraisals as I'm a Realtor. The appraisers do look at the subject property's condition as part of the elements to determine value. Some items you will receive full value and other items you won't see an adjustment either negative or positive. Appraisers are individual too. So if you have 10 appraisals on your home done on the same date, its possible to receive 10 different values - probably within a small range, but different values nonetheless.

DallasLoanGuy · ‎10-13-2016

starting over nailed it

Retired Lender