Questions regarding PMI...

October 8, 2013 6:25 PM

I'm investigating reappraising our house to get rid of PMI. We meet the conditions for application, which involve bringing in an appraiser. The appraiser we would pay for is hired through the mortgage company — we have no control over the appraisal process. Do appraisers who are hired to get rid of PMI do a fair and honest job in calculating the true market value, or, alternatively, do their valuations fall close to online appraisals on average, within some percentage? (Are online estimates close to market value, within noise? Two online estimates suggest we are over the required valuation by roughly 40-50k.) Finally, are there downsides or gotchas to getting rid of PMI, other than a smaller federal deduction at tax time?

Note: We are not interested in hiring a realtor/Realtor as we are not selling our home, but merely looking for some answers (hopefully, quantitative) along the lines of the questions written above.

posted by Blazecock Pileon to Home & Garden (9 answers total)

I did a refinance last year (and also bought a house this year). My experience is that online home values have no basis in reality. Appraisals for refinance (and probably for PMI as well) tend to err on the conservative side. Even though the area my house was in was rapidly getting more expensive, the appraisal used data from the last 6 months and I had to pay PMI, even though myself, the lender, and my agent were all sure it would appraise higher. So the appraisal value lagged behind the market price, and the percentage error depends on how quickly the market's changing.

If you are friendly with a real estate agent, you can ask them to do a CMA for you. Just state up front that you are not looking to sell. It doesn't take much time, and my agent has been happy to do this for me, though the prices felt inflated to me. Agents are there for you as a matter of networking, not strictly only when you're buying and selling.
posted by ethidda at 6:31 PM on October 8, 2013 [2 favorites]

I also would be wary of online appraisals. They always seem awfully high to me.

The calculation should be how much will the appraiser cost versus how much will you save? How long until you have enough time (or equity) until the PMI can go away on its own?
posted by gjc at 6:34 PM on October 8, 2013

When I looked into getting rid of my PMI last year, it turned out that it would cost more money to refi than it would to wait it out. Just one person's piece of anecdata.
posted by snarfles at 6:38 PM on October 8, 2013

Response by poster: How long until you have enough time (or equity) until the PMI can go away on its own?

Three years.

When I looked into getting rid of my PMI last year, it turned out that it would cost more money to refi than it would to wait it out. Just one person's piece of anecdata.

We are not refinancing, just trying to get rid of the PMI. I'm assuming these are not connected?
posted by Blazecock Pileon at 6:45 PM on October 8, 2013

We are not refinancing, just trying to get rid of the PMI. I'm assuming these are not connected?

You have to refi (or wait it out) if you have an FHA mortgage. But I can see now that you don't have an FHA mortgage-sorry!
posted by snarfles at 7:03 PM on October 8, 2013 [2 favorites]

We did this in the last 6 months. We started off just trying to get rid of PMI but then realized we could also refinance at the same time. So slightly different but the appraisal process would surely be the same.

Our mortgage broker hired the appraiser and we had no say in it. The guy who did our appraisal was really reasonable and even asked us up front what value we were aiming for in order to get rid of PMI. There is a lot of wiggle room in an appraisal and therefore it helped him to understand what the desired outcome was. I have no idea if this is ethical but that's what he did since depending on the comps, I'm sure he could make the appraisal go any number of ways. We also provided a list of all the improvements we'd done since moving in, which he also appreciated though the comps are really the basis for the value.

For what it's worth, I think our appraisal ended up being higher than I thought it would be and higher than the comps I had looked at.
posted by otherwordlyglow at 7:27 PM on October 8, 2013

If you refi as part of the process the city may receive your appraisal and raise your property tax accordingly. What does the city value your property at and what impact would the increased valuation have on your taxes?
posted by crazycanuck at 9:40 PM on October 8, 2013

We did not get reassessed after the refi.
posted by otherwordlyglow at 6:37 AM on October 9, 2013

Better than looking at the online info, look at comparable nearby sales.
posted by slidell at 10:48 AM on October 13, 2013