Posted on: 19th Dec, 2006 08:12 pm
hi, my bank informed me a few days back that they cannot remove the pmi from my loan because it is fha loan which they bought. i am told that what i was paying around $195 monthly was high, so i'd better refinance at a higher rate. is this the right way to go about?pls advice
Hi Sally,
There is no PMI on FHA loan. But there is a government guarantee for which borrowers pay a mortgage insurance premium or MIP at closing and/or a mortgage insurance premium along with monthly loan payments.
If you haven't paid the insurance premium upfront, you cannot get out from the MIP within the loan repayment period. The only option left out is to refinance with a conventional loan. In case, you do not wish to pay PMI on the new loan, your home value needs to have appreciated to a higher value.
Thanks,
Caron.
There is no PMI on FHA loan. But there is a government guarantee for which borrowers pay a mortgage insurance premium or MIP at closing and/or a mortgage insurance premium along with monthly loan payments.
If you haven't paid the insurance premium upfront, you cannot get out from the MIP within the loan repayment period. The only option left out is to refinance with a conventional loan. In case, you do not wish to pay PMI on the new loan, your home value needs to have appreciated to a higher value.
Thanks,
Caron.
If you haven't paid an upfront premium, you need to pay monthly premium throughout the life of the loan.
Hi Sally,
As per the HUD rules, for loans offered after January 1, 2001, if you have already paid mortgage insurance premium upfront, you will have to continue with monthly premiums. This goes on till you are able to repay debt worth 78% of the initial sale price or appraised home value, whichever is lower.
But the insurance premiums should be paid for at least 5 years. Your lender will be able to tell you if your total payment is worth 78% of the home value.
As far as refinancing at a high rate is concerned, you can go for it if you wish to cut down the $195 monthly cost. But replacing the MIP on FHA loan with PMI on conventional loan may not benefit you. For this, you need to do certain calculations. The lender may help you out in this regard.
Thanks
As per the HUD rules, for loans offered after January 1, 2001, if you have already paid mortgage insurance premium upfront, you will have to continue with monthly premiums. This goes on till you are able to repay debt worth 78% of the initial sale price or appraised home value, whichever is lower.
But the insurance premiums should be paid for at least 5 years. Your lender will be able to tell you if your total payment is worth 78% of the home value.
As far as refinancing at a high rate is concerned, you can go for it if you wish to cut down the $195 monthly cost. But replacing the MIP on FHA loan with PMI on conventional loan may not benefit you. For this, you need to do certain calculations. The lender may help you out in this regard.
Thanks