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PMI Insurance

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MHBDemon

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Wife and I bought a house with around 5% down and we have PMI. I pay about 160 dollars a month in PMI. We purchased the home through a renovation loan and put in a new kitchen. If I had to guess the current loan to value after improvements, i'd probably say 85-90%.

We are currently paying down about 3-4k in credit cards, but after those are paid off, I'm wondering what the best use of our money is.

When it was choosing between paying down high interest credit vs. putting money into 401k/stock market, it was easy to choose based purely on the interest you were paying vs. the return you thought you'd get in the market.

Now it seems a little more difficult. If I got a third party appraisal and knew my exact loan to value %, would I be able to figure out what is the best return for my money between paying down principal and putting money into 401k?
 
Will you save money on a refi right now outside of PMI, assuming you make the ltv?

Also, i'm not sure how much value there is in paying a few hundred bucks for a third party appraisal. If the appraisal isn't attached to a refi with a target value, who knows what they'll come back with.
 
Pretty sure you need 80% LTV to drop PMI. Sounds like you're not there yet. considering that prices are probably flat at best and your still paying mainly interest on your loan every month, you've probably got plenty of time to think about it.

If you think you're there, just try zillow.com. If that number looks realistic to you, you might want to call the bank and refinance anyway, and drop the PMI. I wouldn't get an appraisal without having the mortgage company involved.
 
A decade ago I was able to get a 2nd mortgage to cover the difference between my actual equity and the magic 80%, and avoided PMI that way. It was a higher rate, but I paid it down first, and was able to deduct the interest in the meantime.

I'm not sure that kind of situation is available anymore post crash.

Chances are your cards have the worst % rate. I would pay those down. If your current mortgage rate is > 5.5-6% you absolutely should look at a refi.
 
That arrangement is available. It's often used to avoid jumbo mortgage rates. IOW, you take a first mortgage for $417,000 and a second mortgage for the remainder of the loan (generally not a huge amount).
 
HeavyPetter said:
That arrangement is available. It's often used to avoid jumbo mortgage rates. IOW, you take a first mortgage for $417,000 and a second mortgage for the remainder of the loan (generally not a huge amount).
Click to expand...

Yeah but you've got to have a decent amount of equity to make that work. The holder of the second is swinging in the breeze depending on the home value under that scenario because essentially you are artificially dropping the LTV percentage on the first and making the second make up the difference, so the second needs to make sure they've got a helluva equity cushion.
 
2&2 Slider To Leyritz said:
Yeah but you've got to have a decent amount of equity to make that work. The holder of the second is swinging in the breeze depending on the home value under that scenario because essentially you are artificially dropping the LTV percentage on the first and making the second make up the difference, so the second needs to make sure they've got a helluva equity cushion.
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Oh yeah, I totally agree.
 
I think it also depends on what your long term goals are with the house....live in it 15+ years or not? If you don't plan on staying long term, keep pumping money into your 401(k). If you do plan on staying, I would keep paying down principal as long as your interest rate is higher than what you believe you can earn in the market.

I'm about 99.99% sure you need to be at 80% of appraised value to avoid PMI. How long ago did you buy house / get renovation loan? Even if you have made wonderful and glorious improvements to your house, keep in mind a limited appraisal will only value your house based on recent sales comps in your immediate area.
 
captruss24 said:
I think it also depends on what your long term goals are with the house....live in it 15+ years or not? If you don't plan on staying long term, keep pumping money into your 401(k). If you do plan on staying, I would keep paying down principal as long as your interest rate is higher than what you believe you can earn in the market.

I'm about 99.99% sure you need to be at 80% of appraised value to avoid PMI. How long ago did you buy house / get renovation loan? Even if you have made wonderful and glorious improvements to your house, keep in mind a limited appraisal will only value your house based on recent sales comps in your immediate area.
Click to expand...

We purchased the house in December 2010. The PMI deletion materials I have say I can get rid of it 2 ways. 1) By reducing principal through payments to 78% loan to value. 2) By ordering an appraisal that comes back at 75% loan to value.

I'm not sure what happens if the appraisal comes back at 81%, will they let you pay the remaining 3%?

When I was being approved for the loan, an appraisal was ordered to approve the cost of improvements. That appraisal said that after improvements it would appraise at $250,000, which would leave me at 81%.

Are appraisers ever biased depending on the purpose of the appraisal? Bank wants me to get loan, so they make sure appraisal justifies cost of improvements. Bank doesn't want me to get rid of PMI, so appriasal comes in lower?

Does lender even care that much if mortgage holder is carrying PMI?
 
I'd like to stay in it at least 15 years. Depends on how many kids wife ends up wanting. Interest rate is 5%.
 
I'd just refi to 4.25% with 20% down. No PMI. Kill two birds with one stone.

Regarding your question about the appraisal, yeah, sometimes that happens and the bank and the appraiser will concede a little wiggle room, especially in an appreciating market. But appraisers who intentionally report a predetermined value are basically breaking the law and face discipline and the loss of their license by the state. The banks can also get into trouble for pressuring the appraiser for a higher value, but that's not as likely to happen.
 
PMI is a total scam...Similar to how AIG took the other side of the CDO trade
 
HeavyPetter said:
That arrangement is available. It's often used to avoid jumbo mortgage rates. IOW, you take a first mortgage for $417,000 and a second mortgage for the remainder of the loan (generally not a huge amount).
Click to expand...

dis dude jus' did dis
 
HeavyPetter said:
I'd just refi to 4.25% with 20% down. No PMI. Kill two birds with one stone.

Regarding your question about the appraisal, yeah, sometimes that happens and the bank and the appraiser will concede a little wiggle room, especially in an appreciating market. But appraisers who intentionally report a predetermined value are basically breaking the law and face discipline and the loss of their license by the state. The banks can also get into trouble for pressuring the appraiser for a higher value, but that's not as likely to happen.
Click to expand...

This might be my best option. What kind of credit score would i need to get 4.25%? Are there limitations to how quickly you can refinance after closing?

I just called Wells Fargo and getting rid of the PMI is harder than I thought.
 
dot com said:
A decade ago I was able to get a 2nd mortgage to cover the difference between my actual equity and the magic 80%, and avoided PMI that way. It was a higher rate, but I paid it down first, and was able to deduct the interest in the meantime.

I'm not sure that kind of situation is available anymore post crash.

Chances are your cards have the worst % rate. I would pay those down. If your current mortgage rate is > 5.5-6% you absolutely should look at a refi.
Click to expand...

I didn't think they did those any longer. I know I bought my first home with an 80/15/5 to avoid PMI, but I was under the impression that those type of loans are no longer available.
 
nomadic said:
I didn't think they did those any longer. I know I bought my first home with an 80/15/5 to avoid PMI, but I was under the impression that those type of loans are no longer available.
Click to expand...

5% down is no longer available. Splitting a loan to avoid jumbo is still possible. There are so many areas that got tagged as conforming jumbo though that it's far less popular now.

I did the same thing - 80/15/5 and then a few months ago did a refi. The 80/15/5 was definitely not available to me despite a high credit score, but the new jumbo conforming rates were almost identical to the standard rates, so it didn't matter. The biggest change these days is that you have to prove your income and you have to come up with 20% down, or you pay a higher rate or pmi or whatever.
 
MHBDemon said:
This might be my best option. What kind of credit score would i need to get 4.25%? Are there limitations to how quickly you can refinance after closing?

I just called Wells Fargo and getting rid of the PMI is harder than I thought.
Click to expand...

must wait 6 months before refinancing.

FHA loans will carry PMI for 5 yrs minimum as stated previously.

80.10.10s are doable too.
 
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