Pay down loan to get rid of PMI?

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berg
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Pay down loan to get rid of PMI?

Postby berg » Mon Apr 30, 2012 3:46 pm

Wondering what you guys think about paying down my principal to get rid of the PMI on my loan.

The PMI is around $70 per month and if I continue to pay it down through my normal payment I will be down with PMI and about 4 and a have years and will have paid $3700 toward PMI. I was thinking if I took the 18%, I'd need to earn over 4% over the next 4 and a half years to earn $3700. So I'm wonder, is this is a sound investment? Not only do I "earn" the $3700 for the "investment" of getting rid of the PMI, but it will be also equity I have in the home which I won't have to pay interest in later. Seems like a win-win.

I guess the only real concern is this would be taking about 25% of my available cash. But I max out my 401k and if I wanted to invest some cash, this seems like a better move than the market. Maybe I'm crazy!

Thanks for the help.

p.s. Also considering refinancing my loan from 4.375 to 3.875, this is what got me thinking about doing this, maybe as part of the refinance.

berg
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Joined: Tue Jan 01, 2008 4:25 pm
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Re: Pay down loan to get rid of PMI?

Postby berg » Mon Apr 30, 2012 4:21 pm

Oh and not to mention it will take 33 month of my loan and save me $43k in interest over the life of the loan!

candicem
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Re: Pay down loan to get rid of PMI?

Postby candicem » Tue May 01, 2012 6:28 am

It sounds like you've thought it through and can afford to do it. I say go for it. I hate PMI too. My only concern would be if you have an FHA loan, simply paying down the principal does not remove PMI if you haven't held the loan for a certain amount of time. I believe that's 4 or 5 years, but I could be wrong. Also, you may have to pay for an appraisal to see if you have at least 20% equity (or whatever the requirement for your loan is).

Odin Force
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Re: Pay down loan to get rid of PMI?

Postby Odin Force » Tue May 01, 2012 11:29 am

There was a bit of a "loop hole" that I didn't notice when I tried to get rid of mine. I re-fied back in January with a conventional loan. About 3 weeks ago I paid my mortgage down to 78% ltv thinking pmi would be canceled automatically. It wasn't. Called the mortgage company who informed me that it wouldn't automatically cancel until the loan was "scheduled" to reach 78% which would occur in 2017. They also informed me that I would have to make an entire year's worth of payments and have another appraisal even though I just had one in December of 2011. On the bright side I shaved off almost 8 years of a 30 year mortgage.


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