I had asked for advice a while back here so thought I would go ahead and update you guys on how things turned out.

We bought a house last April and put a lot into gut-renovating it. This is in an up-and-coming area where property values have doubled in the last decade or so and will probably double again in the next 20 years. We had financed 96.5% of the home (FHA first time homebuyer program).

This week we were able to refinance - the house appraised enough higher that we were able to get a traditional loan for 80% of the new amount, drop PMI ($178/month), drop our already-good interest rate by another 0.1%, get $10k cash out, and lower our monthly payment significantly.

So, it worked... sort of. FHA would not let us re-appraise and drop PMI so we did have to pay fees associated with refinancing through another institution, but the fees were less than the PMI we would have paid over the next 12 years so it was a no brainer. The cash will pay down some 0% interest debt we accrued doing the renovations. I had hoped to get more and be able to pay off everything we borrowed, but with our payment $200 less we should be able to pay down debts that much more quickly.

After years of dutiful saving and paying down debts ahead of schedule it feels weird to have even more debt and little savings, but it is wonderful to have our tiny dream house in time for a new baby, and payments that we can manage on one income if needed.

Great to hear that this has worked out for your. Its an inspiration to others and shows how saving and being smart about your finances really pays off. Cheers!

My wife and I are in a similar situation. We bought a house last November and have done a ton of work to it and are most likely at the 80% mark (we haven't had it appraised yet). We would love to get rid of the PMI payment and would love to get an even lower mtg rate. We did a traditional mtg and were told that the earliest we could rid of the PMI was 2 years. Did you pay a one time fee to get rid of it?

Also, could you clarify how you got a 10k cash payout?

Thanks!

aaronisu, the OP refinanced her mortgage to get rid of the PMI.

If you are looking to get rid of PMI and keep your current mortgage terms the same, then you would need to deal directly with your current mortgage servicer.

The alternative is going through the refinance process (appraisal, paperwork, etc.). Whether or not you had to get PMI would be determined by the new appraised value and your loan amount. If your loan amount is 80% of the appraised value, then no more PMI. Another alternative that not many loan officers bring up is Borrower Paid Single Premium mortgage insurance. Instead of paying monthly, you pay a one time fee. Generally this is a better alternative.

And regarding the $10K cash payout, I imagine that the OP did a Cashout Refinance. Generally that will increase your closing cost (or interest rate) compared to a Non Cashout Refinance.

Hope that helps.