Hello everyone,
As an update to our previous post here, we decided to empty out our investments for the down payment on our twinplex and we now have a great rate and a positive cash flow! We appreciate all the comments (orig link below) which led us to this change.
https://forum.mrmoneymustache.com/ask-a-mustachian/in-need-of-some-direction/ Still on a high from our last refinance we decided to take the plunge on our primary residence as well and scheduled an appraisal. Today we received the news of the appraisal and it was not good. Here is some background on our current primary residence:
Purchase Price: value: $218,000, rate: 6.7%
Refinance 1 (2011): value $225,000, rate: 4.85%
*Refianace 2 (2012): value $195,000, rate 3.25% *appraisal as of yesterday
Current amount owed: $170,000
Obviously as you can see above we took a big hit in our property value since the last time we refinanced (2011). We currently do not have the money now to pay down the mortgage in order to have 20% in the property. We emptied our available cash into our investment property a couple of months ago so we are running lean at the moment. The mortgage company said that we can get an FHA loan with the new rate (3.25%), but we will need to pay PMI. We have the option to pay PMI up front at a cost of $2400.00 total which would relieve us from having to have 20% equity. So we have started to evaluate our options and this is what we have come up with:
Option A: Sell current residenceSince our home value took a big hit we were thinking maybe it would be worthwhile to cut our losses and find another property that has better potential for future growth with less maintenance. Our current house was built in 1955 and is still in need of a few major upgrades (new siding, new windows, etc).
We love our house and don't really want to move, but we are keeping this option on table if need be. We have done a ton of upgrades to the house already which makes the $195,000 a lot worse when considering the cost of things like: remodeled kitchen, bathroom, new furnace, refinished hardwood floors, etc since buying the property @ $218,000.
Since we do not have the money available now for a down payment on a new house we would plan on staying on our house until we had a new down payment and then use that.
Option B: Keep current residence, pay PMIWe would pay the PMI fee of $2400.00 knowing we would never see it again and be on our way with our new 3.25% rate. Paying PMI up front would mean that there would be no additional cost attached to the mortgage. We also had a plan to save up for another investment property, this option would still allow for that.
We are leaning towards paying the PMI considering that the rate will reduce the amount of money we pay on our current mortgage. We are not under water on our house, mainly due to the upgrades we have done. I guess we are looking for guidance on if this is something we should consider cutting our losses on. The idea of starting over on a new house makes me feel tired just thinking about it (we have done a lot of the upgrades ourselves). Are there any other options or ideas we have not considered (besides that it was a bad idea to buy real estate from 2002-2007)?
Thank you all, we appreciate your feedback!