If you're paying PMI...

SixPapaCharlie

SixPapaCharlie

May the force be with you
Joined
Aug 8, 2013
Messages
16,415
Display Name
Display name:
Sixer
So in my area, our property values are sky rocketing.
I pay PMI in my monthly payment but I got to reading and if at any point your value is 20% or more than your payoff, you can drop PMI. For me that means knocking $200/ month off my house payment.

Just thought I would share in case you happen to be paying this too.
I called the bank, and they checked and said "Yep, get a formal appraisal and if it exceeds x, we will drop the PMI from your payment"

Anyway, I don't know how many people pay PMI or what housing prices are doing elsewhere but it was sort of a random fluke that I started looking at this and sure enough, I am going to save some money. Thought I would share.
 
SixPapaCharlie said:
So in my area, our property values are sky rocketing.
I pay PMI in my monthly payment but I got to reading and if at any point your value is 20% or more than your payoff, you can drop PMI. For me that means knocking $200/ month off my house payment.

Just thought I would share in case you happen to be paying this too.
I called the bank, and they checked and said "Yep, get a formal appraisal and if it exceeds x, we will drop the PMI from your payment"

Anyway, I don't know how many people pay PMI or what housing prices are doing elsewhere but it was sort of a random fluke that I started looking at this and sure enough, I am going to save some money. Thought I would share.
Click to expand...

PMI rates are also down for those of you who aren't quite there and are considering refi...
 
If you're paying PMI... YOU'RE A CHUMP.

PMI is a complete waste of money. If you dont have at least 80% LTV and the bank wants PMI, then refinance now (before the fed raises rates). If you cannot get a loan without PMI due to high LTV, then refinance with a conventional 80% mortgage and a HELOC (home equity line of credit) for the difference.
If your interest rate is above current low rates, you might even be able to refinance for free by requesting a negative points loan and use the negative point to cover refinance costs.
 
Damn!.......Hold on, I need to throw some popcorn in the microwave and grab a few drinks!

This is going to be a good one!
 
RotorAndWing said:
Damn!.......Hold on, I need to throw some popcorn in the microwave and grab a few drinks!

This is going to be a good one!
Click to expand...

:rofl:

Yeah, even simple FYI posts can spur chest thumping "you're a f***ing idiot" responses here.

Sad really.
 
How does a mortgage payer not know this?

When I was getting ready to buy my first place it was strongly emphasized by my parents to not pay escrow for taxes, and to avoid PMI if at all possible. I was able to do both. I pass along that info to anyone I know that's getting ready for the first time buy. Of course, in today's financial thought process, it's tough for people to put 20% down on anything anymore.

Also - when you signed your mortgage papers did you read the limitations on what you can and cant do with your property? On one of mine they had a statement that I could not store more than 5 gallons of gasoline on the entire property. There were some other interesting provisions they tried to slip in there as well.
 
Always a good reminder. So many people forget it's part of their payment. On our first house I kept a really close eye on property valuations and our loan balance and got an appraisal as soon as I figured we were +20%. Then I told the neighbor and she did the same thing the next week.
 
I refi'd my first house and at closing realized that I had about 19.9% equity. I told them I'd pay the 0.1% difference out of pocket to take PMI out of the equation. Eliminated PMI and got a slightly better rate. Also got a good sized check back for pre-paid PMI.

Had to delay closing a few days to rework the documents, but it helped both long and short term cash flow.
 
EdFred said:
When I was getting ready to buy my first place it was strongly emphasized by my parents to not pay escrow for taxes, and to avoid PMI if at all possible.
Click to expand...

OK, I get the avoiding PMI one.

But what's the problem with tax escrow? They want a metric crapton of verification that you pay the taxes without it (justifiably, taxes are senior to mortgage in the event of default), and I've run the numbers and they're not even charging me a de minimis admin fee for doing it.
 
I had no choice on the taxes. It was required for a VA loan. We never used I pounds in the last 4 houses and can demonstrate responsible tax paying. Yet it was impounds or no loan.

So THEY can to earn money on MY money and I get NOTHING in return. ......****es me off to no end.
 
JeffDG said:
OK, I get the avoiding PMI one.

But what's the problem with tax escrow? They want a metric crapton of verification that you pay the taxes without it (justifiably, taxes are senior to mortgage in the event of default), and I've run the numbers and they're not even charging me a de minimis admin fee for doing it.
Click to expand...
Back in the days of double digit interest rates, it made a little sense. But today at rates around a half percent, you might lose as much as $25/year on $5k worth of T&I. I think that is a small enough admin fee to keep me from having to deal with it each month. At least I did back when I had a mortgage.

And I think that Bri(Y)an deserves a thank you for mentioning this because millions of other people are happily paying what they think they have to but don't. Of course, some people that already knew this think they are smarter than him because someone taught them about it before Bri(y)an learned about it. But at least Bri(y)an figured it out on his own instead of his mother telling him about it.
 
Well, that deteriorated quickly...
 
JOhnH said:
Back in the days of double digit interest rates, it made a little sense. But today at rates around a half percent, you might lose as much as $25/year on $5k worth of T&I. I think that is a small enough admin fee to keep me from having to deal with it each month. At least I did back when I had a mortgage.
Click to expand...

Oh, OK. I don't pay anywhere near $5k in T&I. I don't think I pay $2k on T&I.
 
PMI is just a number, a non tax-deductible number, but just a number nonetheless. At current historically-low mortgage interest rates (and PMI rates), it is a small price to pay to hold 10% of my home's value as a liquid asset, IMO.

But you can't soapbox effectively pointing at numbers on a spreadsheet, so carry on.
 
I just bought too much house back when I bought this one so I didn't put 20% down.
I knew I would be paying PMI at the time and was fine w/ it because it got me into the house.

When I saw the property value had gone up 25% a light went on and I started looking at the PMI.

Unfortunately, Rates are not much lower than what I locked in so refi won't save me anything. But at least now I can put that PMI in savings instead of the trash. At a quick glance, I have paid $9900 for PMI on this house. That's a chunk to throw away.
 
JeffDG said:
OK, I get the avoiding PMI one.

But what's the problem with tax escrow? They want a metric crapton of verification that you pay the taxes without it (justifiably, taxes are senior to mortgage in the event of default), and I've run the numbers and they're not even charging me a de minimis admin fee for doing it.
Click to expand...

Why pay out money ahead of time when I can just make the payment when taxes are due? It's the same thing as getting a tax refund.
 
scottfromboston said:
PMI is just a number, a non tax-deductible number, but just a number nonetheless. At current historically-low mortgage interest rates (and PMI rates), it is a small price to pay to hold 10% of my home's value as a liquid asset, IMO.

But you can't soapbox effectively pointing at numbers on a spreadsheet, so carry on.
Click to expand...

PMI has been tax-deductible since 2007. That provision was extended into 2014 and last December extended one more year. I expect, like every other "temporary" government program, it is now permanent on the installment plan.
 
As an FYI, for FHA loans signed after July 2014, this isn't true. PMI remains for a set period of time regardless of value.

Thankfully, when we signed my loan paperwork, we did it right before this change took place.
 
SkyHog said:
As an FYI, for FHA loans signed after July 2014, this isn't true. PMI remains for a set period of time regardless of value.

Thankfully, when we signed my loan paperwork, we did it right before this change took place.
Click to expand...

This is true.
 
scottfromboston said:
...it is a small price to pay...
Click to expand...

PMI premiums were exhorbitant when we bought our first house 25 years ago. I can't imagine the rates have gone down any. And it doesn't protect you at all - it protects only the lender in the event you are unable to make your mortgage payments. And in the event that the PMI insurer is required to make a claim payment YOU are obligated to repay the insurer upon the sale of your house or refinancing.

It's a racket.
 
Gerhardt said:
PMI premiums were exhorbitant when we bought our first house 25 years ago. I can't imagine the rates have gone down any. And it doesn't protect you at all - it protects only the lender in the event you are unable to make your mortgage payments. And in the event that the PMI insurer is required to make a claim payment YOU are obligated to repay the insurer upon the sale of your house or refinancing.

It's a racket.
Click to expand...

This is true also.
 
So back up a bit?
When they kill the PMI, they repay me what I have paid toward PMI this this year?

I think I read that ^there a few posts back.
 
When my wife and I first bought, we didn't know jack about the process. The mortgage company very specifically went over the terms of the PMI with us, and the month that we cleared 20%, we dropped it.

-------------------- and separately -----------
Refinancing can save you a ton, depending on your loan terms. We unfortunately bought near the top of the bubble back in 2005, and my wife was still a student so we weren't flush with cash. Ended up in a 30 year mortgage.

A few years later we refinanced at a lower rate, for 15 years. Saved us around $70-80K in interest.
 
SixPapaCharlie said:
I just bought too much house back when I bought this one so I didn't put 20% down.
I knew I would be paying PMI at the time and was fine w/ it because it got me into the house.

When I saw the property value had gone up 25% a light went on and I started looking at the PMI.

Unfortunately, Rates are not much lower than what I locked in so refi won't save me anything. But at least now I can put that PMI in savings instead of the trash. At a quick glance, I have paid $9900 for PMI on this house. That's a chunk to throw away.
Click to expand...

I'm always puzzled by this mentality. It got you access to the house you so thought was so necessary in your life you were willing to throw extra labor value its way, so why do you characterize it as trash? I pay rent. I don't consider it throwing money away any more than I "throw money away" spending cash for food and electric, or the avgas I burn in a lyco IO360. It's just another artifact of living, like a spoon or a car. This whole "primary housing as an investment" bit is all misplaced, considering the days of tripling your money in primary housing are going to the grave with my boomer parents. So then, the only thing left is housing as a utility, at which point paying pmi, not paying pmi, renting, not renting, is all immaterial. It's a utility. Enjoy it, or stop b!tching about buying it.

As to buying too much house. I wouldn't put 20% down even if I could afford it. It's simply not something I consider prudent in a labor landscape where homesteading is largely a myth anymore. As such, my liquidity and mobility are much more valuable. PMI is a non-issue for me then from that perspective.
 
hindsight2020 said:
I'm always puzzled by this mentality. It got you access to the house you so thought was so necessary in your life you were willing to throw extra labor value its way, so why do you characterize it as trash? I pay rent. I don't consider it throwing money away any more than I "throw money away" spending cash for food and electric, or the avgas I burn in a lyco IO360. It's just another artifact of living, like a spoon or a car. This whole "primary housing as an investment" bit is all misplaced, considering the days of tripling your money in primary housing are going to the grave with my boomer parents. So then, the only thing left is housing as a utility, at which point paying pmi, not paying pmi, renting, not renting, is all immaterial. It's a utility. Enjoy it, or stop b!tching about buying it.

As to buying too much house. I wouldn't put 20% down even if I could afford it. It's simply not something I consider prudent in a labor landscape where homesteading is largely a myth anymore. As such, my liquidity and mobility are much more valuable. PMI is a non-issue for me then from that perspective.
Click to expand...


Mainly it is a hindsight thing.
Back then, I wanted a house and it got me one.
As I am approaching my very early late 30s I am now focused on building personal wealth. So I examine places where I can stop losing money.

In hindsight, if I were to be buying my first house right now, I would save up half ish or whatever amount makes the most sense and go that route.

Obviously, it got me in but at this point, that money is doing nothing for me. I am giving it away.
 
hindsight2020 said:
I'm always puzzled by this mentality. It got you access to the house you so thought was so necessary in your life you were willing to throw extra labor value its way, so why do you characterize it as trash?
Click to expand...

It does give you access to a house, but only because the lender requires it. Other than that it does NOTHING for YOU...it protects only the lender. So if it's no longer required, paying for it is indeed throwing money out the window.

The thing is, most lenders will never tell you when it's no longer required and will keep PMI going...because, again, it's a huge bonus for them.
 
Unit74 said:
I had no choice on the taxes. It was required for a VA loan. We never used I pounds in the last 4 houses and can demonstrate responsible tax paying. Yet it was impounds or no loan.

So THEY can to earn money on MY money and I get NOTHING in return. ......****es me off to no end.
Click to expand...

They take your money, pay your insurance bill and your tax bill, on time, generally early (in our county that gives a bonus savings) and do that for the literally dollars a year they earn in interest. I'm ok with that. At some point it's not worth the hassle. I pay 3 sets of insurance, 3 sets of taxes; I'm fine with the $30-40/yr to handle that.
 
SixPapaCharlie said:
So back up a bit?
When they kill the PMI, they repay me what I have paid toward PMI this this year?

I think I read that ^there a few posts back.
Click to expand...

No, he paid pre-paids during the purchase process which in partial included PMI (probably 6 mos worth of payments). They refunded him that money since PMI was no longer needed.
 
Mortgage insurance protects a lender from a defaulting borrower who doesn't have enough skin in the game. It was one of those accommodations for lenders to lend to people who couldn't afford what they were borrowing against. If you can't put 20% down on a house you can't afford the house, or if you prefer to leverage above your means and pay the penalty your equity in that purchase will take a monthly hit until you find a way to suspend paying the penalty fee. Put that $200 per month toward principal debt and you're making money.

Serial renters never achieve equity. Owners do. Young guys think boomers had everything handed to them. They never considered that most older guys worked really hard and took decades to accumulate their worth. The notion that real estate investment is no longer beneficial is silly. What's his name should ask his landlord about that!
 
Stewartb said:
If you can't put 20% down on a house you can't afford the house...
Click to expand...

I respectfully disagree. 20% is a lot. Here's an example.

A young professional couple just starting out, let's say they make a combined $70K/year. They want a modest but nice starter house at $175K. That's a fairly typical scenario in my area at least.

20% down is $35K...an incredible amount to come up with up front. Made even more difficult if they're paying rent until they can save up enough. Add to that $35K the closing costs and furnishings for the house and I can easily see where your scenario would be impossible for most people starting out. Add in some real-life expenses like student loans, car payments and typical expenses we all face...I think 5-10% skin in the game for people like this is reasonable.

The only thing is that there are far too many people who never have any intention of keeping their promise of making their mortgage payments and trash the house on their way out. People like that hurt us all.
 
Gerhardt said:
I respectfully disagree. 20% is a lot. Here's an example.

A young professional couple just starting out, let's say they make a combined $70K/year. They want a modest but nice starter house at $175K. That's a fairly typical scenario in my area at least.

20% down is $35K...an incredible amount to come up with up front. Made even more difficult if they're paying rent until they can save up enough. Add to that $35K the closing costs and furnishings for the house and I can easily see where your scenario would be impossible for most people starting out. Add in some real-life expenses like student loans, car payments and typical expenses we all face...I think 5-10% skin in the game for people like this is reasonable.

The only thing is that there are far too many people who never have any intention of keeping their promise of making their mortgage payments and trash the house on their way out. People like that hurt us all.
Click to expand...


Sad. They will barely be able to fly. :(
 
I don't think 20% is an unreasonable amount of money to have to come up with, but in our case, we happened to think the market was at the bottom and about to climb, and we were only at 13% or so. I wanted to jump early to take advantage of the timing, so we did (this was 2011).

It ended up being a great move, and I'll guess we got into the house for about $70K less than had we waited another year for us to save to 20%.
 
Gerhardt said:
I respectfully disagree. 20% is a lot. Here's an example.

A young professional couple just starting out, let's say they make a combined $70K/year. They want a modest but nice starter house at $175K. That's a fairly typical scenario in my area at least.

20% down is $35K...an incredible amount to come up with up front. Made even more difficult if they're paying rent until they can save up enough. Add to that $35K the closing costs and furnishings for the house and I can easily see where your scenario would be impossible for most people starting out. Add in some real-life expenses like student loans, car payments and typical expenses we all face...I think 5-10% skin in the game for people like this is reasonable.

The only thing is that there are far too many people who never have any intention of keeping their promise of making their mortgage payments and trash the house on their way out. People like that hurt us all.
Click to expand...

$175k isn't a starter house for a $70k income couple. They are over buying.
 
Gerhardt said:
PMI premiums were exhorbitant when we bought our first house 25 years ago. I can't imagine the rates have gone down any. And it doesn't protect you at all - it protects only the lender in the event you are unable to make your mortgage payments. And in the event that the PMI insurer is required to make a claim payment YOU are obligated to repay the insurer upon the sale of your house or refinancing.

It's a racket.
Click to expand...

Isn't all insurance a racket? I rank it in the number 3 position in terms of entire industries that are worthy of RICO indictments. That puts it right behind the hospital industry and the higher education industry at 1 and 2 respectively, and right ahead of the banking industry and the Mafia at 4 and 5.

Rich
 
EdFred said:
$175k isn't a starter house for a $70k income couple. They are over buying.
Click to expand...

Actually, that seems more than reasonable to me. Borrowing $140K on a 30 year note is about $700/month. With a $5800/month gross? What's the problem?
 
kayoh190 said:
Actually, that seems more than reasonable to me. Borrowing $140K on a 30 year note is about $700/month. With a $5800/month gross? What's the problem?
Click to expand...

I guess other people's definition of starter house, and my definition are vastly different.
 
You must log in or register to reply here.
Back
Top