Question : Should I take out a home-equity line of credit to pay down my mortgage to eliminate PMI?
My husband and I are currently paying PMI (Private Mortgage Insurance) on our mortgage. (We have no second mortgages.) I know we need twenty percent equity in order to eliminate PMI, but I don't think we're quite there. Is taking out a home-equity line of credit to pay down the mortage a good idea? I know that we'd then have two loans to pay, but the PMI would be eliminate and all of our payments (minus the interest) would be going toward the loan rather that insurance. Is it possible to get a home-equity line of credit for 6%?
- asked by Melissa O
All Answers:
Answer #1
Remember that PMI is based on 20% equity. So ifyour home has appreciated in value since you'vebought it, you might have the 20%. Talk to thebank and see. We did and had PMIeliminated!Otherwise (to answer your question) thesooner you can eliminate PMI, the better. Sellblood if you have to (okay, that might be a bitmuch)
- answered by words_smith_4u
Answer #2
To eliminate PMI you have to get an appraisal doneto verify the your equity. An equity line ofcredit is a variable rate based on prime rate. Ibelieve it is around 7-8% right now. I personallyfeel PMI is ok becuse HELOC's are adjustable andyou would end up paying more interest over timethan insurance in most cases. You should contactyour bank to see how and when eliminate you canstop paying this insurance (sometimes you cannoteliminate PMI for at least two years). If youcalculate your interest payments on the HELOC tobe less than PMI and you can pay the balance offquicker than having the insurance for two yearsthen it's a winner.
- answered by tianaramal
Answer #3
Rather than take out a second mortgage why don'tyou just pay the additional money toward theprincipal every month. That way you are payingdown the principal, saving yourself from payingthe additional interest and increasing yourequity. Talk to your bank and see how far youneed to go to get to the 80%. Also, don't justassume once you get to the 80% that the bank willautomatically knock off the PMI - you need to tellthem in writing.
- answered by Kathleen M
Answer #4
You should just pay extra to the principal on yourfirst mortgage. There is no need to take outanother loan and I don't understand why you would. Just write your mortgage payment for more thanyou have to pay and make sure they know it is togo toward the principal on your loan.
- answered by Phoenix
Answer #5
Home Equity Lines Of Credit are usually adjustablerate loans based upon the prime interest ratewitch today is at 8.25%. That is a base rate andmay be higher for individual borrowers dependentupon their combined loan to value and creditscores.Your PMI will be automatically waived after2 years as long as your payments have been on timeand the market in your area is stable.You cananalyze the viability of a line of credit optionby computing your proposed line of credit paymentcompared to the PMI payment.If you'd like you cancall me toll free at 800-971-4638 ext. 223 andI'll help you get enough information together tomake a good decision.No charge, no commitment,just glad to to help
- answered by mazziatplay
Answer #6
i don't thing this is a good idea to take homeequity line in order to pay your first mortgage.you will end up with higher payment- interestrates on equity lines are more then 8.25%- maybeyou can get lover rate for a couple of months andin order for you to pay principal on this loan ,you need to pay more, then your monthly payment (it's working like credit card- min. payment coveronly the interest) why don't you call anyappraisal and ask about value check on your house?i agree with the answers before me to rather payore towards your principal on your mortgage.
- answered by bianca
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