Board Topic: home equity/pmi requirements
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home equity/pmi requirements

Posted by: ed Oct 21 2004, 11:50 PM
1. Hi I have a 4 unit building with a loan of 327,000 at 5.75 fixed for 30 years in which I pay pmi insurance because at the time of purchase(4 years ago) I paid 375,000. I also have a 135,000 home equity line of credit maxed. I want to remove the pmi premium which I think is around 150 a month due to the dramatic increase in value(will now appraise at 550,000). My question is can I remove the pmi and will the home equity line have iny play in the banks decision ? 2. I've heard about loan modifications, do they really work ? Any help on this is greatly appreciated. ed

Posted by: loanuniverse Oct 22 2004, 08:10 AM

In my line of business, I do not deal in PMI. The building is clearly being financed as a primary residence, which is good because you are getting rates that would be hard to beat in the commercial arena.

Right now even at the $550,000 value that you mentioned, you are looking at only $88,000 or 16% equity. I might be wrong here, but it is my belief that PMI is needed when your equity is below 20% and that a second mortgage such as a HELOC is counted when determining the equity.

The best course of action of course is getting in touch with the lender holding the first mortgage and asking it directly.

Posted by: ed Oct 22 2004, 08:48 PM
1. have you ever heard of a loan modification ?

Posted by: loanuniverse Oct 23 2004, 09:23 AM
I have, but what would be the incentive for the lender to take out the PMI requirement?

Posted by: ed Oct 24 2004, 12:05 AM
i mean how does a loan modification work ? what is the proper way to get it done ? i will continue to pay the pmi. thanks, ed

Posted by: loanuniverse Oct 24 2004, 01:18 PM

A loan modification is a change to the initial terms and structure of the loan. It would be done in the form of a document that both borrower and lender have to sign. My guess would be that you need to convince the lender to agree to the changes, and the lender will then create new documentation to amend or replace the existing one.

The trick here is convincing the lender. In the commercial side of business, we do modifications regularly. For example, one of our customers might have a $500,000 line of credit for working capital, but his business might have grown enough that the customer needs $1 million now. If the lender agrees, the Bank can create a new loan agreement increasing the amount, and ”modifying” the advance rate to allow for more availability.


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