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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Assetup on April 26, 2019, 09:24:24 AM

Title: Get rid of PMI or after tax investments?
Post by: Assetup on April 26, 2019, 09:24:24 AM
A bit of background: 401k, HSA and Roth are set to Max out this year(100% stocks) automatically and now I'm trying to figure out if I should kill the PMI. 

Mortgage - 252k remaining at 4.2% (3 years in HCOL)
PMI-$120 per month

I need to pay down 30k to have 20% principal and then I have to pay for an appraisal to get the PMI removed. Houses value is well north of 340k now. It doesn't seem like a refinance pays off even though I could get a slightly better rate ~4% now.

I can have the PMI removed in one month and then start putting everything else in after tax investments.

I have seen a variety of different methods to see if I come out ahead paying down the mortgage but I'm hoping someone would share their numbers/opinions on my situation.  Thanks for your time
Title: Re: Get rid of PMI or after tax investments?
Post by: thd7t on April 26, 2019, 09:32:30 AM
Before you do anything, talk to your mortgage provider.  Some loans require 22% down to pay off existing PMI.  Afterward, here's my thinking:

I usually look at PMI as if you had a second mortgage.  You have a $222k mortgage at 4.2% and a $30k mortgage at 4.2%+$120/month.

This looks like your PMI is costing $1440/year on $30k.  That's about 4.8% on top of your current 4.2% mortgage rate (which costs about $1260 for the top $30k of your mortgage).