Getting rid of PMI

[VeeDubb]

Originally Posted By: JHZR2
What does not using escrowdo for you?


I don't think it'll affect your rates or fees. But I don't do escrow because it gives me more control over the components of my payment. It keeps me on my toes with regard to my property taxes and makes it easier to negotiate it downward with the county treasurer. Same applies for my insurance. It just makes you aware of how much you can save on both over time if you pay attention.

 

[Bill in Utah]

Quote:
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 like to know that my Taxes and insurance are paid. No questions when I send in the check and have the canceled document in my hand.

Every year so far, I have changed my home owners insurance (just did it last week 11-10 (been here 10 years now)) since the insurance went up from $374 to $493 in one year.

Went to another company for $344 per year. That is $150 savings per year. If I was paying with a escrow there would be some hassle when you change the insureance companies.

I've heard of tax liens due to escrow companies screwing up.
They don't pay the fines for late payment and your county (never seen one) does not give a grace period due to lost/who knows what/why payments.

Just never had to do a escrow account so I've passed when offered one.

Take care, bill

 

[eljefino]

Originally Posted By: 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.


You hit my nail right on the head!

I look at PMI as just one angle they could use to get me, if I get a better interest rate and let the PMI drop at its scheduled time (~9 years on a 30 yr loan) I figure I would have broken even. But since I refi'd a year later into a 20 year with 20% equity... bye bye PMI! I was contractually locked into ~2 yrs of PMI with my 1st mortgage but refinancing wiped that contract clean.

As much as I hated it, the $100/month was cheaper than renting a place for several years more while saving for the "standard" 20% down.

What they aren't counting on is many people weaseling out of PMI early. Good luck!

 

[eljefino]

Originally Posted By: 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.


Buy a house. It's rough the first couple years but really pays off. I'm done with my mortgage at age 46 and will have 19 more working years of just buying toys.

 

[Gary Allan]

Originally Posted By: eljefino


Buy a house. It's rough the first couple years but really pays off. I'm done with my mortgage at age 46 and will have 19 more working years of just buying toys.

Don't count on it. I'm about 25 months from paying mine off. In that time I expect the taxes and inflation to out pace my savings. Over the 11 years of the mortgage, even in alleged non-inflationary times, my combined taxes went from $1800/year to over $4800/year. That's $300/month of my "future savings" before I ever realize them in avoided costs. Now the up ramp will be MUCH WORSE.

 

[firemachine69]

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?



20% is pretty good. My bank said they wanted to see 30% for a personal-residential in my neck of the woods, 40% for commercial-residential (i.e. "rental units"). Then again, I already carry 35% debt-value-to-net-income, so that might have been part of the issue... Not to mention, I just started building a rainy-day fund.

 

[rjundi]

A home equity loan applied against the equity you have may cover your PMI. The hard part is getting your home appraised in current market and hopefully worth the same as when you purchased. The market is down overall and banks and appraiser are very cautious now. You have to pay ~$300 for an appraisal from a bank approved (chosen) one.

Remember its not 80% of the loan but 80% of home value. I was lucky on my first home and lost PMI in 12 months due to a serious increase in the market. I only put down 5% and was at 80% value in 13 months.

My other suggestion is to simply pay down your mortgage faster until PMI is done. Remember you are getting a 5-6%(mortgage rate) guaranteed return for paying principle down. Front loading is the smartest thing to do overall.

 

[zulu]

I pay PMI, but for my situation, it's just the nature of the beast. My wife and I used up our savings trying to survive while I was finishing school. Now I have a very steady job with a good income, but it would have taken us years and years to save 20% down. We were tired of paying somebody elses mortgages in rent, so we just financed the whole loan. Our two viable options were an 80/20 loan or 100% + PMI (I refused to take any high risk/variable/intrest only type loans- I wanted a fixed rate only.) The end montly costs were within $10 of each other. I gambled I would be able to acrue 20% equity in the house and ditch PMI before I could pay down my higher rate loan (80/20 method). But one year later, housing prices in my area tumbled. Now we are (at best guess) 5-7K negative equity in our 2 year old home. But I have a great 30 yr fixed rate, so we just keep plugging away. Don't really have any other options.

 

[JHZR2]

Originally Posted By: rjundi
A home equity loan applied against the equity you have may cover your PMI. The hard part is getting your home appraised in current market and hopefully worth the same as when you purchased. The market is down overall and banks and appraiser are very cautious now. You have to pay ~$300 for an appraisal from a bank approved (chosen) one.

Remember its not 80% of the loan but 80% of home value. I was lucky on my first home and lost PMI in 12 months due to a serious increase in the market. I only put down 5% and was at 80% value in 13 months.

My other suggestion is to simply pay down your mortgage faster until PMI is done. Remember you are getting a 5-6%(mortgage rate) guaranteed return for paying principle down. Front loading is the smartest thing to do overall.


Fortunately in our town prices have actually stagnated but not dropped at all. A favorable appraisal should be easy to do.

I've heard mixed explanations of the law, which seem to be 80% of either purchase price or actual value. Not a huge issue either way...

 

[Bryanccfshr]

I also have used my VA loan twice about to be 3 times. The 0 down and no PMI is a huge benefit. Putting money down on a house is a huge waste for me sinc e I tend to movew every 3-5 years, I need the tax writeoff not principle paid.

 

[eljefino]

Originally Posted By: JHZR2

I've heard mixed explanations of the law, which seem to be 80% of either purchase price or actual value. Not a huge issue either way...


The default in your contract is they'll automatically cancel it when you have the loan value paid off by 20%... 9 years or so later on a 30 year fixed.

You can petition them to drop it earlier, if you can prove you've had an increase in value. But they generally won't volunteer.