patrick.net

Holy mother, 270 a month PMI! I took a loan with a specific request to get out from under the PMI from the get go. Less than two years later was the summer of 2016 when we hit our near record interest rate bottom, refinanced into a 2.625% 15 year. But, my property was cheap, since 2014 the price has gone up 25% on it, to bad for me, my taxes are up, (yearly assessment) equity is better, but who cares about equity if you don't own the place, as it is my payment went up $100 a month switching from a 30 to a 15 and the condo dues have gone up $50 since I moved in, my income is going down because health care premiums come out of my paycheck. I can only compensate by working more hours, and spending less otherwise. Now, with the rate so low it doesn't even makes sense to make an extra payment, or pay it off early, inflation is eating away at the loan balance faster than I can pay it off.

You have to run the numbers to see if getting out from under the PMI will be a lower payment vs. a higher rate, or you can bite the bullet and pay up front for mortgage points to get your rate lower, it all depends on if you plan on staying in your home for a longer period of time.

OR, wait it out (this is what I would probably do now, i.e. Germany right now has the lowest average mortgage rates in the world at 1.9%), because the next time we get a recession (not an if but a when), rates will be at zero again, possibly negative, probably be a few years yet, but could be longer because interest rate is still way, way, way below historical levels, and QE is still playing out in a myriad of ways.

Purchased my childhood home in coastal Southern California (3 miles from the beach) in April 2015 from my parents. No greedy realtors involved. 4bd/4ba, 1600sqft, 6800sqft lot.

Selling price was $429k (market value at the time). I put $10k down and $10k upfront PMI on a 4%, 30-year fixed. My income is $120k and I'm single.

Kept the Prop 13 assessment and my property taxes are only $2400 per year. Spent the last three years remodeling everything, probably put in about $40k cash.

Currently valued around $675k and my balance is $390k.

Mortgage Payment, Taxes, PMI and Insurance total out to $2550 per month and I rent one room to a friend for $600 a month. The homes across the street are renting for $2800 and $2900.

Current plan is to start adding $500-$800 per month to the principal and wait to see what the market and rates do. I have no plan on selling unless there was some change to Prop 13 laws. Ideally I would rent this place out someday.

Patnet will absolutely love this one too... 6-months after I bought the house, I got laid off from my job at a large tech company after 10 years. Got a nice severance, collected unemployment, looked for work but never really found anything local (I don't live in a big city and it takes over an hour to commute into LA). After about 8 months of unemployment, I applied for Keep Your Home California. I got approved and they started making payments (including payment, taxes, insurance and PMI). Two months later, I was gainfully employed making better than my old salary. I called them on my first day of employment to let them know to stop payments. They then proceeded to tell me that they would then make the payment for the month I was re-employed AND for the next 3 months after that. So I basically got $16,000 in payments for free. AND... if I got a job that paid less than I had before, they would have put money in every month to make up for the discrepancy. Catch is that I need to pay them back if I sell and if you re-fi you cannot pull money out. All good by me, I won the California liberal lotto.

joshuatrio says

I'm ready for the next down turn. Plan on buying a vacation home/rental.

Exactly. If another crash happens I'm buying an apartment building or 10 condos.

MrBark says

if I got a job that paid less than I had before, they would have put money in every month to make up for the discrepancy.

I didn't quite catch this part: they would pay you the difference between your old and your new salary? This sounds too outrageous even for CA. Can you explain in more details?

Hassan_Rouhani says

MrBark says

if I got a job that paid less than I had before, they would have put money in every month to make up for the discrepancy.

I didn't quite catch this part: they would pay you the difference between your old and your new salary? This sounds too outrageous even for CA. Can you explain in more details?

Let's say you make $100k a year. You are used to making $100k a year and paying your $2600 mortgage payment, which is around 35-40% of your net income.

You become unemployed via layoff (didn't get fired or quit your job). New job you find pays you $70-80k a year – now your mortgage payment is closer to 45-50% of your net and that can be seen as a stretch for affordability. Since the program's key goal is to keep your in your home and to avoid foreclosure, Keep Your Home California program will kick in a percentage of extra money toward your payment each month based on your new lower income.

There was also a principal reduction program where they would pay something like up to $120k to reduce your underwater mortgage balance. I believe the unemployment program I was on was up to 18 months of mortgage payments while unemployed. Part of me wanted to take advantage of the entire 18 months and live like a bum with a house – but it's just not in my blood, I like my lifestyle too much.

Those 8 months I was unemployed, I really did work my ass off looking for a job. I treated it as its own job, woke up early every morning and mush have had 3-4 solid interviews every month. I didn't turn to the program until 6-months into being unemployed when I only had about 4 payments left in the bank.

MrBark says

Let's say you make $100k a year. You are used to making $100k a year and paying your $2600 mortgage payment, which is around 35-40% of your net income.

You become unemployed via layoff (didn't get fired or quit your job). New job you find pays you $70-80k a year – now your mortgage payment is closer to 45-50% of your net and that can be seen as a stretch for affordability. Since the program's key goal is to keep your in your home and to avoid foreclosure, Keep Your Home California program will kick in a percentage of extra money toward your payment each month based on your new lower income.

Got it, thanks for the explanation.

4. Refinancing to get rid of PMI
5. Credit score has gone up decently, and refinancing makes sense
6. Refinancing because you've been offered a lower monthly payment (probably over a longer period)

There are plenty of reasons to refinance beyond trying to take out cash.