DEAR BOB: I notice it has been a while since you had any complaint letters about the dreaded PMI (private mortgage insurance) premiums. Perhaps you and your readers might like to know how my wife and I got rid of PMI after the lender first said “no.” Although we had about 25 percent equity, because our mortgage was not 24 months old, the nasty lender refused to cancel our monthly PMI premium of about $120. When I phoned and asked to speak with a lender supervisor, after I made a “big deal” of getting her name and location, I explained the lender consequences of my refinancing elsewhere and that I would write a letter to the president of her company explaining how much she cost her firm by refusing to cancel my PMI. The next day she phoned me back to say she had obtained approval for an “exception” and my PMI premium would be immediately cancelled. Maybe other homeowners can use my same technique – Chris C.
DEAR CHRIS: Congratulations on your superb negotiation to get your PMI cancelled. Most mortgage lenders arbitrarily refuse to cancel PMI unless a home loan is at least 24 months old even when the homeowner has well over 20 percent equity.
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That 24-month rule is based on Fannie Mae and Freddie Mac policies. Of course, after their chairmen resigned in disgrace, we learned how superbly managed those organizations are.
As you probably know, PMI helps home buyers with low or no down payments purchase their residences. But in rapidly rising markets or when homeowners make valuable improvements to their residences, home equity can quickly grow over the 20 percent threshold, which is considered safe for mortgage lenders. After equity exceeds 20 percent, there is little risk of foreclosure loss to the lender.
You were very wise to speak with a supervisor, get her name and location with the implied threat of retaliation if you didn’t get your PMI cancellation, and then leave it up to her to avoid a complaint letter, which would result in the lender’s lost loan profit. However, just between us, most mortgage lenders don’t care if they lose an existing loan.
CAN HOME SELLER STOP INSTALLMENT SALE LOAN REFINANCE?
DEAR BOB: About three years ago, I sold my rental house to my longtime tenant for nothing down. She was very grateful. I carried back the mortgage at 7 percent interest. That was good income for me and a fair interest rate for her. She faithfully made all the payments on time. But the house rapidly appreciated in market value. Today, she has at least 30 percent equity and can easily refinance to pay off my mortgage. But I don’t want her to do so as I have become dependent on that monthly income. What can I do to stop her from refinancing? – Sarah S.
DEAR SARAH: There isn’t much you can do other than offer to reduce the interest rate to be competitive with the mortgage refinance your buyer is considering. Even if you have to reduce your interest rate to the current mortgage market interest rate around 6 percent (where else can you earn 6 percent today?), that’s a great deal for you and a good deal for your buyer because then she won’t have to pay any refinance costs.
ARE SELF-STORAGE BUILDINGS A GOOD INVESTMENT?
DEAR BOB: I have an opportunity to invest in a new self-storage building offered by a major chain. The minimum investment is $200,000. Are self-storage buildings a good investment? – Rick L.
DEAR RICK: In many communities, there is an oversupply of self-storage facilities. The business is extremely competitive. Please personally investigate the situation in locality you are considering to determine if you will be making a safe investment.
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