Single Family Home Rental "Breaking even"

[John Beck]

My background in Real estate would consist of owning my home and 1 rental property, that I break even on, every month. By "break even" I really mean, that my mortgage for that property is covered by the rent, but anything extra, is out of my pocket. Ok, so I'm not really breaking even.

I got into this rental situation because we had an opportunity to purchase an immaculate foreclosure, and needed to cover the mortgage on our previous home.

I found out from the bank that I can drop PMI on my loan if I pay $11K on the mortgage principal. This would reduce my payment by about $225/month.

I can get the money from my 401K (loan). I feel like in this case it would be worth it,  since I'd reduce the amount of interest over the life of the mortgage, and increase my cash flow from 0 to abt $225/month.

I understand that this is financial advise and none of you represent me, or can give me binding advice, I am just looking for some input and thoughts from the more experienced people here.

[Brendon Woirhaye]

I really do not like the idea of getting a 401k loan, but it may make sense in this situation by eliminating that PMI. You can put that extra cash flow towards paying down your loan and have it done in 4 years, but you'll miss out on 4 years of growth of that 11k in your 401k plan. You'll have to run your own numbers, but consider whether you gain more in keeping the money in your 401k than you pay in PMI.

Are there other alternatives to escape the PMI? Has the value increased, to the point where you owe less than 80%? If so, that may be a way to get the bank to drop the PMI without impacting your 401k.