Hey fellow Mustachians! I start a new job at the end of the week, and with that I'm reevaluating how I want to allocate my investment distributions. Essentially my question boils down to how much I should contribute to my 401k vs how much to put towards my mortgage to get rid of PMI. For reference, I'm already contributing to a Vanguard tIRA to max each year ($6,000).
Here is the math behind my PMI:
Home value at time of purchase: $220,000
Value now: $235,000 (This rough estimate according to Zillow - I know these can be inaccurate but it's the lower end of the "estimates" on other sites)
Loan Balance: $207,661.92
This would mean to get to 80% LTV I need to get the loan down to $188,463.66
Amount to pay off to get to that LTV = $19,198.26
PMI Payments = $144.89/mo = $1,739.04/year
According to that, the "interest rate" of that PMI would be 9.06%! ($1,739.04 / $19,198.26). Obviously that number would indicate a "hair on fire" type emergency and fits toward the top of the Investment Order that we recommend around these parts (
https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153), but I don't see PMI mentioned in there, so I wanted to be sure.
It's worth noting that in order to get rid of PMI at that point I'll need to refinance into a conventional loan (which will also likely require a home value inspection), but given the numbers above it seems still worth it.
The new company offers a 401k match of up to 3% and I can afford to max it if I want, but I feel like I should contribute less than the max so I can allocate some of that money toward extra mortgage payments until I reach 80% LTV.
Essentially my options are:
1) Max 401k and pay minimum on the mortgage
2) Contribute up to the 401k match and put the rest into the mortgage until 80% LTV on the mortgage so I can refinance
3) Some sort of split
Open to any thoughts or suggestions!
