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"For mortgages with terms more than 15 years, the annual mortgage insurance premiums will be canceled when the Loan to Value ratio reaches 78 percent, provided the mortgagor has paid the annual premium for at least 5 years."
If you go through an FHA streamline refinance does the PMI clock get reset back to 5 years?
Thanks for the replies.... Was hoping that there were some FHA guidelines that exempted this since they make alot of exceptions on their streamlines (ie. "no" credit check/no reappraisal)
Because streamline refinances do not require an appraisal, am I correct to assume that the 78% LTV PMI Removal clause is based on the ORIGINAL loan's appraised value?
Example:
Home is purchased in 2007 for $100K... FHA Mortgage of $96K... PMI should be removed after 5 years and once mortgage balance is $78K
In 2010, the value of the home is now $75K and the mortgage balance is $85K.
Homeowner wishes to do a streamline refinance.... With no appraisal, they obtain the new mortgage.
I would assume that it does not matter what the current value of the property is.... The homeowner will be able to have his PMI calculated against the new balance of $85K, and also be able to have the PMI removed after 5 years and once the mortgage value reaches $78K.
I have the same question. My understanding is that refinance resets the PMI. Can't believe it is so hard to find the answer to such an important question.
yes..if no appraisal they go off the original purchase price or last appraised value. But even if at 78%...if you streamline you still have to pay the mi for 5 years.
It would seem to me that if the numbers worked out right you could take some of the savings from the refi, apply it to the new loan and work towards getting to that magic 78%. The potential upfront insurance refund could pay for a lot of the costs of another streamline refi.
That's what I am aiming to do in 18 months or so.
This assumes a lot and the numbers have to work out perfectly, but it is worth mentioning.
If you pull out a ammortization schedule payoff to 78% doesn't occur till year 10 according my math with 3.5% down.
So what does 5 years matter if you don't have any chance to remove MI unless you have had the loan for more than 5 years or made extra payments toward principle. I would argue take the interest savings on the streamline and add that towards principle.
I am doing quite a few of these for my clients now that FHA rates are under 4% at no cost and it's important they understand how their MI works.
Here is my situation: took FHA loan and bought home in Jan2011. refinanced in March2013. if I pay off the principal quickly now to reduce the LTV ratio to less than 78%, will my PMI time get reset and do I have to pay another 5 years from march 2013 or do I only pay till the first 5 years of PMI(provided the LTV is less than 78%)?
so based on the above time frame, I have to pay PMI till Jan 2016 or Apr 2018?
please advise.
thanks
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