Buying my first vacation/investment property loan question

[Joshua Carr]

I have a primary residence in which I'm about 20k from getting to 80% of the original purchase price. We originally put 5% down when we didn't have as much cash reserves and have been paying PMI since. Our financial situation and cash reserves have changed quite a bit over the last couple years and we are looking at buying our first investment property/vacation rental.

Currently I’m planning on talking to my bank about getting approved for a second loan as we are starting a search for our second property.

We will have the 20-25% down for the second property/loan, but my question(s) is around the first loan on my primary residence and what I should/can do there:

1. I’m assuming I will have the pay the 20K to get that loan to 20% of the original purchase price to qualify for a second loan?

2. After I pay that, I would be eligible for: A. Not paying PMI; B. Potentially Recasting and improving my monthly cash flow by 300-400 per month and not going through the whole process and expense of refinancing C. Refinancing down to the lower rates (at about 4% on my loan currently)...(the home has also appreciated about 35% from the original purchase price through some upgrades we've made and market conditions ) and potentially pulling my 20K out and then some if I wanted (I'm not eligible for a refinance and avoiding PMI until I pay down to 80% of the original one so that's why I'd have to pay the 20k first)

Not sure what the best approach here is and would appreciate any insights and previous experience or any correction to my thought process above.

Thanks!

Josh

[Michael Baum]

Hey @Joshua Carr, I am not sure you are ready to buy a property just yet.

As for the PMI, how long have you had that loan? Getting PMI removed can be a chore. PMI will automatically drop off when your loan to value ration hits 78%, not 80%. You can request it once you hit 80% but many lenders will not allow it. Plus you have to have an excellent payment history. Nothing in arrears.

Of course a ReFi is one way to get rid of it. You said you are not eligible for a ReFi, why is that? If you have the 35% appreciation (according to whom?) then you should be able to ReFi with little fanfare. You might be able to talk to the lender and get a no cost ReFi if they offer it.

https://www.bankrate.com/mortg...

You said you have 20-25% for the down payment on the new property? What does that mean? How much are you looking to spend? Where are you looking for a place?