One of the biggest myths regarding PMI removal
The biggest misunderstanding we hear from borrowers with the PMI removal process is that the process might increase their property taxes. This simply isn’t possible, so let’s walk you through why not.
Removing PMI may require a new home valuation
The property tax confusion usually starts because a mortgage servicer will require a new home valuation if you are trying to remove your PMI based on your home’s current value. In most cases, this is a broker pricing opinion (BPO), but in some cases an appraisal is required. Your lender (usually Fannie Mae or Freddie Mac) orders the BPO. The BPO contains an estimate of your home’s value, but that is a private document that is only provided to your lender, your mortgage servicer and you. The home’s estimated value is never published publicly. Therefore, your local government does not ever have access to that new valuation.
Coze provides a free, instant PMI removal eligibility check. Check how much you could save by dropping PMI.
Your property taxes are determined by an assessment from your local government
Rules vary based on state, but generally your local government will hire an assessor to reassess your home every one to five years or when it changes hands. The assessor takes a set of quantitative measures for the property and determines a property value. Your property taxes are based on this updated property value. This process is completely independent of any private home valuation, such as an appraisal or a BPO.
Your tax assessment isn’t relevant for PMI removal
On the other hand, your mortgage servicer can’t use your recent tax assessment to determine eligibility for PMI removal. Only a BPO or appraisal - ordered by your mortgage servicer and paid for by you - will suffice to determine your home’s current valuation for PMI removal. So even if your property is assessed well above the valuation you need to drop PMI, you’ll still have to pay for a valuation from your servicer.
PMI removal won’t impact your property taxes
In short, if your home has appreciated in value, your property taxes will increase once it’s reassessed. State laws generally dictate how often that reassessment happens. Requesting a BPO to remove your PMI has no impact when your property is reassessed. So good ahead request that PMI removal - it won’t impact your property taxes.
