Originally posted by @Brent Coombs:
Originally posted by @Thierry Enongene:
Originally posted by @Joshua S.:
Originally posted by @Thierry Enongene:
So guys I have read both arguments in excess and I kinda see where both sides are coming from and it makes sense. I guess one big factor that swirls in my head regarding the arguments is how to me, it seem like one of the big differences is TIME. However, putting a dollar value to it may be a whole other discussion. I am however trying to adopt the heloc strategy, at least just one time, because I really think it will help with my personal situation and wanted to get insight from the 'against camp' if my thinking is flawed.
The thing is I currently have a PMI on my mortgage. I know the ideal is always for all to put 20% down, but I never had that luxury. The PMI component adds around $200 to my mortgage. I believe if I get a heloc to knock down my principal down to 80 LTV , it will wipe off the PMI right off the bat, saving me roughly 5 years of PMI payments, and approx 12k, which would have been all premium and not benefit me in anyway. At least I see the heloc as a replacement of the mortgage portion subject to PMI. All payments/extra payments will now go to the actual mortgage (aka $200 now goes to actual mortgage, not PMI). Am I flawed in adopting this strategy in this manner? Its seems intuitive to me.
You may want to check with your lender that your target is 80%, because I have PMI on one of my loans and their website says they will take it off when I reach 70%. I'm not sure why that is, but it's their rule. The other place you can look for more equity / lower LTV is in your appreciation depending on how long you have had the property. Again, this is the case with my lender, but they say you can pay for an appraisal and if your home has appreciated, that will add to your equity as well.
Secondly, if you are paying PMI you might not be able to find a lender that will give you a HELOC since you may not have the equity. But in this case you could also try a personal line of credit. The interest rate will be higher, but especially if you are able to avoid years of paying for PMI, it would still work in your favor. I know I'm in the "for" crowd, just thought I would throw this out there. Good luck.
Yes the target is 80%. The thing is the actual loan it not at 80% LTV, but the value of the home is significantly more, thanks to pretty good appreciation from the past 2.5 years or so since purchase. I think an appraisal would be required if a lender was to grant a heloc, to kinda get the real market value of the home on the record or something along those lines. We are in fact in a high growth area. Anyway I will just need inquire with lenders and check if they do grant them. But my thinking included the projected new appraised value to be considered as equity.
If "the value of the home is significantly more" (than you paid), won't you already have 20%+ equity? ie. If their appraisal will show that you already owe less than 80% of its current value, why wouldn't they remove the PMI (without you artificially paying for extra equity)?
[Conversely, if you're not at 20%+ equity yet, then how much did you over pay 2.5 years ago?]...
Well I'm not at 80% LTV with my original loan. I guess per the lender, everything is still based on the original transaction. My actual documents show right now LTV is 86% , and the PMI is scheduled to fall off October 2022. Again, I don't cherish the concept of paying the premium that long, it feels like I'm throwing money away.
I'm not quite sure if I follow what you are saying. The Heloc and the mortgage will prob not be from the same lender. Unless you are suggesting that I petition my current lender to re-appraise the home to take the PMI off. I guess I never thought about it that way, but is that something mortgage lenders even allow? But yes, based on the true value of the home now, we should be below the 80% mark.
Also to follow up on Josh's point, the value I am using is the one determined by the county recently for next year's tax assessment (ouch) , not zillow and the like. Although zillow has it 10k more than the county does, but I'd rather be conservative. But it has appreciated about 8% or so, and that's why i was thinking about the heloc to wipe out the remaining 6% and save the 4 years of PMI left to pay.
