Getting rid of PMI

[JHZR2]

Hello,

I have a concern regarding my financial position because of the fact that I pay PMI. I pay over $100/month in PMI, which is a total waste. My wife and my collective salary is over half of our home's value, and Ive never missed a payment.

All the same, I depart from my typical ultra frugal and financially conservative ways in that I dont particularly care to pay my mortgage down to 20% quickly... and thats a personal choice, as I save heavily but like to spend a bit of my money while were still young and extremely flexible to travel and do stuff (i.e. no kids).

Because of this, Im wondering about home equity loans. it seems that there are some attractive rates available, down into the "5's", which is where my mortgage rate is too.

Back when mortgage brokers were trying to finance everyone, they seemed to be giving out a lot of 80/20 loans. My understanding, which may be wrong, is that this also got rid of the PMI issue, as the first mortgage was 80% or less of the purchase price.

My question is, if I can get a second or HE loan at a favorable rate equal to or better than my mortgage (or at least real close), can I get rid of my PMI? i dont know the exact amount I need, but it is between 5-10%.


Any thoughts? if not, any suggestions on how to get rid of the PMI? I hate paying it.

Thanks!

 

[Winston]

Haven't heard of 80/20 loans, but I have heard of 80/10/10 loans. 80% first, 10% second, 10% down. Don't know how easy that is on a refi though.

 

[Pablo]

I'm surprised you of all people pay PMI. Once and only once, on my first house I was there. Total waste, IMHO - but I'm not judging it for your situation. I got out of mine in 198X by rising RE values. (oops) IIWYAIKIAN I would buckle down and hit on the principle.

 

[HTSS_TR]

You're paying PMI because when you had your first mortgage, the loan was more than 80% of the house value (you had less than 20% down on appraised house value). If your current loan balance is less than 80% of current house value, you should contact your lender to drop the PMI.

Don't lump HE or second mortgage with the first mortgage, it is confusion to lender. After you get PMI drop from the first lender then you can looking for second or HE with the same lender or another lender.

 

[Bill in Utah]

Originally Posted By: Pablo
I'm surprised you of all people pay PMI. Once and only once, on my first house I was there. Total waste, IMHO - but I'm not judging it for your situation. I got out of mine in 198X by rising RE values. (oops) IIWYAIKIAN I would buckle down and hit on the principle.


I've never paid it.

Was it around in the early 80s when I bought my first house?

For $100 a month, I'd find a QUICK way to get rid of it.

I'm old school as far as my mortgage, just pay P&I on a 15 year loan.

No escrows for Insurance or Taxes. Don't trust them to take it out.

Bill

 

[Cutehumor]

I'll be looking to buy my first house next year. I don't want to pay the PMI either. 20% down is what needed of the value of the the house to avoid the expense?

 

[Bill in Utah]

Originally Posted By: Cutehumor
I'll be looking to buy my first house next year. I don't want to pay the PMI either. 20% down is what needed of the value of the the house to avoid the expense?
I think so. If you are below the 20% down (or borrow more than 80% like the folks who bought my last house (they had enough for 25% down but got a 125% loan.. Needed a SUV

) then I guess you get the privilege of paying PMI.

Ouch.. $100 a month..

 

[VeeDubb]

Originally Posted By: Cutehumor
I'll be looking to buy my first house next year. I don't want to pay the PMI either. 20% down is what needed of the value of the the house to avoid the expense?


Our real estate agent told us that its possible to avoid PMI with 15% down but I was skeptical. I don't believe you get something for nothing. Sure enough, the interest rate is higher with 15%. You'll just have to compare the options using a mortgage calculator and go with the best option.

 

[deven]

If you have a pal at the real estate agency that knows a real estate appraiser, have him/her re-appraise the house so it is appraised >20% to what you owe on the house(if indeed you owe more than 80% of what the house is worth). Then you can talk to your lender and have them eliminate the PMI. I would no re-finance right now because of the recession, the banks are being a real pain in the [censored] about refinance plus you'll have to pay closing costs and all that stuff which will just add close to $3k on your mortgage. Thats a lot of 100 dollar bills.

 

[dkryan]

deven,

Most of the financial institutions in this area will send THEIR appraiser (not YOURS) to evaluate and appraise the home for purposes of removing PMI.

Bill in Utah: (SUV basher!) They also wanted to buy mini-vans loaded to the hilt ($4k DVD system "for the children"), BMWs, Lexus (look at me), etc.

JHZR2: I can relate to being a DINK (dual income, no kids) and wanting to travel, etc. You said you "save heavily." How heavily? No figures, please, but if you're maxing out your 401(k) and IRA (or Roth IRAs), then put some of that extra savings toward principal only. Your financial institution will most likely accept an additional amount beyond the monthly amount notated for "principal only." That's the only way my wife and I managed to ditch the extortion that was called PMI.
Forget the home equity loan and increase your principal payment each month.

 

[tom slick]

When I bought my house (2002) I did an 80/20 and did not pay PMI. The first was as regular mortgage and the second was a home equity loan. A year later real estate was still shooting through the roof so I refinanced, dropping two percent, and getting rid of the second.

 

[Bill in Utah]

Originally Posted By: dkryan

Bill in Utah: (SUV basher!) They also wanted to buy mini-vans loaded to the hilt ($4k DVD system "for the children"), BMWs, Lexus (look at me), etc.



No, too lazy to type Suburban.

Whether they bought a SUV, MiniVan or Corolla, it is DUMB to buy ANY car with a 30 year loan.

Or to take out a 125% loan..

NOT A BASHER...

 

[moribundman]

Quote:
Getting rid of PMI


They have a pill for that.

 

[dkryan]

Bill in Utah,

Stay calm. I wasn't aiming at you, directly.

Most folks bought into the home equity line of credit as a means to finance their second (or third) vehicle based on the lending institution's (then) low rates and them touting the fact that the interest was tax deductible,which in most cases, it was.

But regardless of which loan they used, tying up your home's equity with a depreciable asset (rapidly depreciable, in some cases) puts you behind the eight ball rather quickly in today's economy.

 

[JHZR2]

yes the 401ks and roths are maxed out (or close to it if 14% isn't max on 401k). I also buy I bonds regularly and don't keep balances on stuff. When I bought, I didn't have the dual income, but I bought in the right place with the right commute, where we liked and wanted to be long term. Buying the right place first, even with pmi beats the 6% commissions I'd have to pay to upgrade.

I figured if there was some sort of scheme to keep the same rates and do away with the PMI, I would. Alas, it seems this is not the case, so we will make it our goal to get rid of the pmi. It's not that I'm far from 20%, it's that I'm at the point in the mortgage where we pay mainlyinterest and of course a healthy dose of property tax in NJ...

Thanks!

 

[JHZR2]

Originally Posted By: HTSS_TR


Don't lump HE or second mortgage with the first mortgage, it is confusion to lender. After you get PMI drop from the first lender then you can looking for second or HE with the same lender or another lender.



Why should I care if I confuse the lender? Right now I'm paying to protect the lender so they are effectively screwing me. I need to make the best deal formyself, not worry about them. If I can get an he loan at the same rate as myfirst, then pay it to my first so it reaches 80%, then I win.

Idont want a loan for any reason than to cut a check to my first mortgage to make the balance 80% so I kill pmi, that is all. Paying principal is great, but since we don't get a tax break on the wife's med school bills, and we do on the mortgage, paying her so off is the better move. I just want to get rid of pmi.

 

[JHZR2]

Originally Posted By: Bill in Utah


I'm old school as far as my mortgage, just pay P&I on a 15 year loan.

No escrows for Insurance or Taxes. Don't trust them to take it out.

Bill




Shows what I know... You can do that?

With ING only paying 2.75%, is there any practical reason to avoid their escrow? Seems like a simple way to avoid thinking about saving for and paying out insurance and taxes. What does not using escrowdo for you? I shopped by rate and low closing costs, I don't really know much beyond that for what is best.

Thanks

 

[crinkles]

I read the title to this thread and thought "great, I should get my missus to read this"... didn't turn out to be "Getting rid of PMS".

We can't decide whether to buy a house or not. My job looks reasonably secure. I don't know if the market will drop.

We pay $300 a week rent for a house. on a 250,000 mortgage you get a crummy house, $500 repayments, of which $380 goes into interest the first few years. So financially, I don' tthink we are worse off for renting. its the emotional thing that makes may wife want us to buy a house. And yes, we would need mortgage insurance to the tune of $5000 (upfront) to get a loan as we don't have a 20% deposit.

 

[kaboom10]

We got a zero down VA loan to purchase our house. One benifit of ducking bullets while in the military.

 

[Bill in Utah]

Originally Posted By: kaboom10
We got a zero down VA loan to purchase our house. One benifit of ducking bullets while in the military.


THANK YOU for your service to our Country!