No, it will not feedback to your property taxes in any way.
The appraised value of your home represents the home's fair market value (what a buyer might expect to pay if you listed your house for sale on the market), while its assessed value is used to determine property taxes (which increase the larger your assessed value becomes).
Yes, you have to pay for the appraisal, yes this is normal and legal. Below 80% LTV is based on purchase price and the only time it is automatically removed is when you fall below that number. All other valuations require an appraisal from the mortgage company.
Getting rid of your private mortgage insurance (PMI) can save you money, and there's no downside. After all, the insurance only protects your lender—your homeowners insurance is the policy that protects you. The sooner you can cancel PMI, the more you'll save.
You can request to have PMI removed from your loan when you reach 80% LTV in your home. You can achieve an 80% LTV ahead of schedule if your home's value increases or if you make extra loan payments.
Get an Appraisal
Many lenders (like Fannie Mae) also require a two-year “seasoning requirement,” meaning you can't have PMI removed until you've made two years' worth of on-time payments—even if your equity has grown above 20%. If it's been less than five years, you might even be required to have 25% worth of equity.
If you're mere months away from hitting 20% equity to automatically remove PMI, you might think twice about kicking off this process. On average, an appraisal will cost a homeowner $450 to $550. The cost of an appraisal might exceed the PMI you'd need to pay to get to 80% LTV.
Pay down your mortgage sooner to remove PMI
For example, you could make one extra mortgage payment per year. Multiply your original home purchase price by 0.80 to determine the amount your mortgage balance needs to be to qualify for PMI cancellation.
Appraised value: Lenders typically require this valuation to make sure they're not lending more money than a house is worth. A professional appraiser performs an appraisal through – at least in most cases – an in-person evaluation of a home's condition and features.
While real estate appraisal fees are generally not directly tax-deductible for personal residential properties, there are specific scenarios where you may be able to indirectly benefit from these expenses. It's important to consult with a tax professional who can provide guidance tailored to your unique situation.
Consumers have the option of filing a complaint regarding their appraisal or evaluation directly with their lender, or through the lender's federal regulator. Visit HelpWithMyBank.gov for more information about how to contact your lender's regulator and how to file an appraisal complaint.
An increase in the appraised value does not necessarily lead to an increase in property taxes. Property taxes are determined by local tax rates and the assessed value of the property, rather than its appraised value.
Currently, PMI is not deductible for the 2022 or later tax years. That could retroactively change, however, if Congress passes an extension allowing filers to claim deductions for mortgage insurance premiums paid in those years.
If a home is appraised to be higher than the asking price, the lender will only issue a mortgage for the appraisal amount. This leaves the borrower to either cover the remaining cost on their own or return to searching for a home with a listed price that matches the appraised value.
PMI is not deductible like interest, so it generally makes sense to get rid of it. It shouldn't change your property taxes significantly, just the usual annual update.
The Bottom Line: Getting Rid Of PMI Can Save You Money
As you build equity in your home, you may be able to cancel your PMI so you can save money each month. If you have a conventional loan and own 20% equity in your home, contact your lender to see if they can cancel your mortgage insurance.
All you have to do is request in writing that the private mortgage insurance be canceled (most lenders have a brief form which must be filled out) and provide the lender with proof of sufficient equity over 20%. In most cases, the necessary proof is a state certified appraisal.
A borrower can request PMI be canceled when they've amassed 20 percent equity in the home and lived in it for several years. There are other ways to get rid of PMI ahead of schedule: refinancing, getting the home re-appraised (to see if it's increased in value), and paying down your principal faster.
Your lender will require an appraisal, but might accept a BPO instead to verify the property's current worth before it'll agree to cancel the PMI. It's a less expensive alternative to a formal appraisal and can satisfy the property value assessment required by your lender, provided it aligns with your loan terms.
Qualify for a larger mortgage: With a 30-year fixed, your monthly payment is a smaller percent of your total monthly income. With a lower ratio, you may qualify for a larger mortgage. Flexibility: A smaller monthly payment gives you more flexibility to decide what to do with your money.
Improvements are most likely to be considered substantial if they cost or add value in an amount equal to the balance you have left to pay down on your loan to reach 80% of your property's Original Value.
You pay for PMI as part of your monthly escrow payment. That means in addition to paying your property taxes and homeowners insurance into your escrow account, you also pay your monthly PMI fee into the escrow account as well.
How to remove PMI. Generally, once you reach 20% equity or when you pay your loan balance down to 80% of the purchase price of your home, you can request that your lender or servicer remove PMI from your monthly mortgage payment.