hand wrote:Another vote for paying whatever required to eliminate PMI since you will have sufficient emergency funds left over.
If removing $32k from savings causes other hardships, you could consider restructuring your debt instead of paying it off... Perhaps a Home Equity loan or a loan against an existing car would make you feel more comfortable with your cash position without committing to PMI.
OneDay wrote:I am surprised no one has asked how long you plan to live in the house. If it is a long time then I would be in favor of putting the equity in so you wouldn't have PMI. If you did have PMI and housing prices drop then that PMI would be on for a long time. If you we're only going to be in it for a short while then I doubt it makes much of a difference.
siebgal wrote:Not sure if this is the right forum:
We are refinancing for $316k at 3.375 APR. We are required to pay primary mortgage insurance because our house appraised at $355k. To avoid this, we would have to reduce the amount of the loan to $289k, which is $32k out of savings. We do have this. My husband thinks we should pay this amount. I'm nervous about shelling out so much. It would still leave us with a 6-8 month emergency fund. Thoughts?
Mudpuppy wrote:Conventional PMI is much easier to cancel. You are allowed to cancel when you fall below 80% LTV, either due to market conditions or prepayment.
TSR wrote:Mudpuppy wrote:Conventional PMI is much easier to cancel. You are allowed to cancel when you fall below 80% LTV, either due to market conditions or prepayment.
Be careful here. I have PMI on my current mortgage, but it cannot be cancelled due to market conditions or improvements that add value. My PMI agreement states that I can only cancel on one of two "dates":
1. The date the principal balance of your loan is first scheduled to reach 80% of the original value of the property, based solely on the initial amortization schedule for your loan and irrespective of the outstanding balance of your loan on that date. . . . (original value is defined as either the contract price of the property or the appraised value of the property at the time the loan is consummated)
2. The date the principal balance of your loan actually reaches 80% of the original value of the property, based solely on your actual loan payment.
(all emphasis in original)
For the OP, this means it can be that much harder to get rid of PMI and is another reason not to get it!
Outer Marker wrote:OneDay wrote:I am surprised no one has asked how long you plan to live in the house. If it is a long time then I would be in favor of putting the equity in so you wouldn't have PMI. If you did have PMI and housing prices drop then that PMI would be on for a long time. If you we're only going to be in it for a short while then I doubt it makes much of a difference.
It makes a difference every month. Same as taking $150 out of your wallet and burning it. Adds up quickly. Zero is the right amount of times to do this.
Mudpuppy wrote:With a little web searching, I think I sussed out the issue here. The letter of the law from the Homeowner's Protection Act (HPA) only requires "original value", as listed above. However, Freddie and Fannie added the option of using "current value" (as shown by an appraisal). If you have a Freddie or Fannie loan, you can cancel based off current value or original value. Freddie and Fannie also added another wrinkle, which is that the original value can be voided if the market has *depreciated* greatly, so that is a bit of a two-edged sword there.
If the financial institution first holds the loans in their own mortgage holdings, you would only have the HPA disclosure in your closing documents (because that would be all that would apply to a privately held mortgage). If you later receive a letter stating that the loan was sold/transferred to Fannie or Freddie, you are now under their cancellation rules and the paperwork in your closing document is outdated. You should get an updated disclosure in your annual impound account statements in that case.
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