Help getting rid of MIP (not PMI)

Discussion in 'After Hours Lounge (Off Topic)' started by Drew Bethel, Aug 18, 2004.

  1. Drew Bethel

    Drew Bethel Screenwriter

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    We have purchased our home almost 2 years ago and pay $75 per month for MIP. I was wondering if we can use an appraisal (along with paying down a chunk of the principal)to hit the 80% LTV required to get rid of MIP.

    My bank (Chase) is telling me that I can't use an appraisal because it's FHA...I just want to make sure that they're not taking me for a ride.
     
  2. Patrick Sun

    Patrick Sun Moderator
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    I think you'll probably have to re-fi into a conventional home loan to leverage any gains in home value to get rid of MIP (or PMI on the conventional loan).
     
  3. Philip_G

    Philip_G Producer

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    guy I used to work with took out a second mortgage when he bought his house so that the primary was low enough to avoid MIP.
    He doesn't get the write off on the second, but it's probably better than paying 100 bucks in insurance.
     
  4. Leila Dougan

    Leila Dougan Screenwriter

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    From what I remember when I bought my house a few months ago, with an FHA loan you are locked into MIP for a minimum of five years and no appraisal or LTV will get you out of it.
     
  5. Jeff Gatie

    Jeff Gatie Lead Actor

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  6. Scott Wong

    Scott Wong Second Unit

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    *nod* A good friend of mine also has two mortgages in order to alleviate the need of MIP. His loan officer was able to get the pre-approval for two separate mortgages essentially... *shrug* I think over the long term, he's saving quite a bit of cash.

    I thought normally you just had to reach the 20% mark that Drew is referring to and MIP no longer applies. There must be more to it??
     
  7. Win Joy Jr

    Win Joy Jr Stunt Coordinator

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    With FHA, the only way to get rid of it is to Re-Fi into a convential loan.
     
  8. Drew Bethel

    Drew Bethel Screenwriter

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    >>With FHA, the only way to get rid of it is to Re-Fi into a convential loan.
     
  9. Michael Pineo

    Michael Pineo Stunt Coordinator

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    You can get rid of it, but not until you have reached the 80% mark. From the way that it was explained to me, that is 80% of the original cost of the house, not what you can get it appraised for. So even though my house would sell for $60,000 more now than what we paid for it a year ago (I shit you not. I live south of Boston), I still have to pay down to 80% of the original purchase price.

    Of course, I'm not an expert on this stuff, but that is how I understand it.

    MikeP
     
  10. Leila Dougan

    Leila Dougan Screenwriter

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    Please read this link:
    http://www.fha.com/mortgage_insurance.cfm

    It clearly states that on mortgages with a term of longer than 15 years, you must pay insurance for a minimum of 5 years. If after that 5 years you've reached 78% LTV, the insurance will be terminated.

    I don't see how you can get the MIP dropped without meeting the 5 year rule without refinancing and getting a different type of loan.

    Michael, I'm assuming you're talking about a conventional loan? In that case, you CAN get PMI removed based solely on appreciation. The only catch is you have to pay for the appraisal yourself. But a few hundred bucks is worth it if you know your house has increased enough in value to put you at 78% LTV. Without an apppraisal, the bank just bases it on what it appraised for at time of purchase.

    Drew, what are some other methods of getting out of MIP on an FHA loan?
     
  11. David Devaux

    David Devaux Agent

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    I've got two loans. When I bought I took what was called and 80-15-5 loan. It is 5% down, an 80% mortgage and a 15% homeequity loan. I have two payments a month, but I save a ton because no PMI. It also saved me cause the 15% equity line also brought my primary mortgage below 300K, so I did not have to take out a jumbo loan.
    Also, the equity line is prime, so it's only like 4% (not sure what prime is at the moment), but that can change.

    I figure on the combined loan amounts of 315K, I am saving about $300 a month. A drawback is, that if I really do want to take out an equity loan I need to payoff the other one first, or take that amount out of the amount the bank gives me. Since it is still 50K, if I took out an 80K equity line, I would only get 30K.
     
  12. Drew Bethel

    Drew Bethel Screenwriter

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    >>Drew, what are some other methods of getting out of MIP on an FHA loan?
     
  13. Leila Dougan

    Leila Dougan Screenwriter

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    David, I have an 80/10/10 loan so I know what you mean about saving PMI. However, there are some major differences between a conventional loan and an FHA loan. For an FHA loan you're stuck paying the insurance no matter what your downpayment is and there are caps on how much you can borrow. In my area, $160K is the most you can get on an FHA loan. Because my credit was sufficient to secure and HELOC loan to cover the downpayment, I didn't want to get stuck paying for the insurance if I didn't have to. Which is why I got a conventional loan instead of an FHA loan.
     
  14. Tim Abbott

    Tim Abbott Second Unit

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    Drew - You have exactly two choices as mentioned above,

    1. Refi into a conventional scenario

    or

    2. Wait the three more years or so and request that MIP be cancelled.

    Also, don't forget that you paid an upfront MIP of 1.5% of your loan amount when you bought the house. That upfront MIP is partially refundable. You may be able to essentially refi for free once you take into account the refund.

    If you need assistance, please feel free to drop me an email and I would be happy to talk to you about it.

    Tim
     
  15. Scott Tucker

    Scott Tucker Stunt Coordinator

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    Refi into a conventional loan. If you need to get a 2nd to help with the down payment, do it so you don't have to pay PMI. The interest you pay on the 2nd IS in most cases tax deductble. You will also get a better rate going conventional.

    Scott
     
  16. Philip_G

    Philip_G Producer

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    specifically WHAT cases? My friend does not get the write-off.
     
  17. Drew Bethel

    Drew Bethel Screenwriter

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    I don't think it's worth it to refi to save $75 per month. We are at 6% fixed and plan to move within 3-5 years anyway.
     
  18. nolesrule

    nolesrule Producer

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  19. Chris Lockwood

    Chris Lockwood Producer

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    >He doesn't get the write off on the second

    He needs to find a better tax advisor. Why should it matter if it's all one loan, or two, as far as deductions go?
     
  20. Jason L.

    Jason L. Second Unit

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    What I find interesting about these new rules, is that they are so much more lenient now.

    I got a FHA mortgage in early 1999 because no one else wanted to loan money for a condo. Back then they charged 2.25% upfront in MIP plus .5% each month, and you could never get rid of the MIP payments.

    Later they changed it to 1.5% upfront plus .5% each month, and you could never get rid of the MIP payments.

    Now you get the lower rates, and you can get rid of the MIP after a certain threshold is reached.

    Man, did I get screwed. At least it gave me the initiative to pay off my 30-year mortgage in 5 years and 2 months.

    They changed the rules because they were making so much profit off the MIP, they were generating huge surpluses - unlike years ago when there were a lot more defaulted loans.
     

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