removing PMI or paying off higher interest mortgage or saving/investing

[Clementina Reynolds]

Hi all--

Mortgage 1) 

interest rate 3.5%, $10k left to remove PMI (purchased as residential, now use as an investment property)

not cash flowing, but will be if I removed the PMI (cash flow would be like $50/month)

Mortgage 2)

interest rate 6.1%, $45k left to remove PMI (purchased as residential and currently looking to house hack)

Option 1) pay off PMI for mortgage 1 (start cash flowing!)

Option 2) use extra funds at the end of the month into a principal payment for mortgage 2

Option 3) invest extra funds in the stock market

Option 4) save extra funds in a high yield savings account and recast mortgage 1 so then the cash flow can become extra principal payments toward mortgage 2 or in savings to purchase another property.

I don't know how to compute which is the better option, but would also like personal advice and other options I hadn't thought of.

Thank you.

[Doug Smith]

Divide the annual PMI payments (monthly PMI X 12) by the amount it will take to pay it off. That will get you a %. Is that percentage lower than what you can get in a money market? Is it lower than what you can reinvest that same capital and yield? You'll need to understand what % you are saving on an annualized basis to compare. That should make the decision a bit easier.