Author Topic: Help with Identifying Mortgage Options  (Read 2568 times)

DejaYou

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Help with Identifying Mortgage Options
« on: July 05, 2014, 09:19:45 AM »
Hi there - I am hoping if the MMM community can help me identify some options with my existing mortgage.  In a sense, I am just looking to see if there is a better way to be approaching things here?

Overall, I have a 30 year mortgage on a house that is valued at $130,000, which was essentially the amount of the mortgage itself as well.  Each month my payment is $1200 (around $200 principal/$500 interest/$500 escrow - 4.85% APR). 

If I keep this up, and look long-term, I am going to be out $360,000 on a house that is likely only going to appreciate at a minimal amount, maybe $200k?  Part of this is just how the mortgage industry works, I get that, but to me this is a crazy way to go about being financially prudent, when at the end of the day i'd have this asset on hand, but be out maybe 2x what it is worth?   

matchewed

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Re: Help with Identifying Mortgage Options
« Reply #1 on: July 05, 2014, 09:28:31 AM »
I'm no real estate expert but your escrow sounds really high. Why is that so?

But outside of that, now that you have the mortgage your asking these questions? No offense but this is something you ask before you sign the dotted lines.

That being said you could try to aggressively pay the mortgage. At 4.85% it is at that borderline where some people will think it is worth it and others won't. Or you could also keep paying your minimums for two years and then sell to minimize tax hit. Or just run some numbers and determine what is good for your area and your circumstances and do appropriately regardless of tax.

DejaYou

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Re: Help with Identifying Mortgage Options
« Reply #2 on: July 05, 2014, 09:50:11 AM »
My escrow includes PMI, property tax and home owners insurance, among things.  Is that atypical?

Overall, I was a first time home buyer looking to get in under the deadline for the First Time Home Buyers Credit ($8k from Uncle Sam) and had little of my own money to put down, so went FHA, which I know the terms are maybe not as favorable, but I wanted to make the move.  The house itself was the right for my family and had been discounted a few times already.

I will use your link to see if I can arrive at some of my own conclusions.

Thanks for your help.

matchewed

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Re: Help with Identifying Mortgage Options
« Reply #3 on: July 05, 2014, 10:06:10 AM »
My escrow includes PMI, property tax and home owners insurance, among things.  Is that atypical?

Overall, I was a first time home buyer looking to get in under the deadline for the First Time Home Buyers Credit ($8k from Uncle Sam) and had little of my own money to put down, so went FHA, which I know the terms are maybe not as favorable, but I wanted to make the move.  The house itself was the right for my family and had been discounted a few times already.

I will use your link to see if I can arrive at some of my own conclusions.

Thanks for your help.

Ah that explains it. The PMI, one of the fun things about going FHA. They often will saddle you with the PMI and the normal rules for eliminating PMI don't apply. Basically you scrambled for an 8k credit without running the numbers on the impact. In the future it is much better to save for your down payment. Put the 20% in and you can avoid additional things that will screw you financially like PMI. This post states that you need to have made PMI payments for five years and have 22% equity in order to eliminate the PMI payments, or as it is called for FHA loans MIP.

I'm not a big fan of getting mortgages with PMI as you can tell. It is a great way to saddle people with extra payments.

Basically this opens another option. If you can keep up payments for five years and gain at least 22% equity in your home then you can eliminate the PMI payments which would drop your payments by whatever amount it is.

DejaYou

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Re: Help with Identifying Mortgage Options
« Reply #4 on: July 05, 2014, 06:40:21 PM »
Well I believe I am essentially at or a little above that # in terms of equity at the moment.  My principal is at around $115k and I could probably sell the house for $140k-145k.  Is that how you determine equity?

matchewed

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Re: Help with Identifying Mortgage Options
« Reply #5 on: July 06, 2014, 09:20:06 AM »
Well I believe I am essentially at or a little above that # in terms of equity at the moment.  My principal is at around $115k and I could probably sell the house for $140k-145k.  Is that how you determine equity?

It is what the house would be assessed at I believe. You determine equity by LTV (link). Or what a buyer is willing to buy it at.

ampersand

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Re: Help with Identifying Mortgage Options
« Reply #6 on: July 06, 2014, 05:06:03 PM »
Can you refinance? I have a principle almost the exact same as yours and have a payment of 1070, for a 15 year mortgage (2.5%). The fifteen year rates are generally 1% under 30 yr, at least they were a year ago in my area (OK)


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Another Reader

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Re: Help with Identifying Mortgage Options
« Reply #7 on: July 06, 2014, 06:23:06 PM »
You are right at the 80 percent line.  It might be worth your while to see if you can refinance on a conventional loan at a lower rate with no MIP.