[(former)FormerSanDiegan]

[quote=Scarlett]If the prices DROP and after 7 years your house is worth than the loan, would the PMI be removed according to plan, or not?[/quote]

I believe so, unless superceded by recent changes in the law …

http://www.frbsf.org/publications/consumer/pmi.html

Under HPA, you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80 percent of the original purchase price or appraised value of your home at the time the loan was obtained, whichever is less. You also need a good payment history, meaning that you have not been 30 days late with your mortgage payment within a year of your request, or 60 days late within two years. Your lender may require evidence that the value of the property has not declined below its original value and that the property does not have a second mortgage, such as a home equity loan.

Automatic Termination

Under HPA, mortgage lenders or servicers must automatically cancel PMI coverage on most loans, once you pay down your mortgage to 78 percent of the value if you are current on your loan. If the loan is delinquent on the date of automatic termination, the lender must terminate the coverage as soon thereafter as the loan becomes current. Lenders must terminate the coverage within 30 days of cancellation or the automatic termination date, and are not permitted to require PMI premiums after this date. Any unearned premiums must be returned to you within 45 days of the cancellation or termination date.

[(former)FormerSanDiegan]

[quote=Scarlett]If the prices DROP and after 7 years your house is worth than the loan, would the PMI be removed according to plan, or not?[/quote]

I believe so, unless superceded by recent changes in the law …

http://www.frbsf.org/publications/consumer/pmi.html

Under HPA, you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80 percent of the original purchase price or appraised value of your home at the time the loan was obtained, whichever is less. You also need a good payment history, meaning that you have not been 30 days late with your mortgage payment within a year of your request, or 60 days late within two years. Your lender may require evidence that the value of the property has not declined below its original value and that the property does not have a second mortgage, such as a home equity loan.

Automatic Termination

Under HPA, mortgage lenders or servicers must automatically cancel PMI coverage on most loans, once you pay down your mortgage to 78 percent of the value if you are current on your loan. If the loan is delinquent on the date of automatic termination, the lender must terminate the coverage as soon thereafter as the loan becomes current. Lenders must terminate the coverage within 30 days of cancellation or the automatic termination date, and are not permitted to require PMI premiums after this date. Any unearned premiums must be returned to you within 45 days of the cancellation or termination date.

[(former)FormerSanDiegan]

[quote=Scarlett]

I thought it was $3200. Anyhow, $900 difference wouldn’t be a modest car payment. $400-500 would be. My 3 yr loan payments on a new Accord are close to $700/mo. It’s true about the 401k loan, that it goes back to him eventually; I was thinking about his cash flow.[/quote]

2400 + 450 + 250 = 3100. But I won’t squabbnle over $100.

You should consider that you account for the $250 you are paying yourself back, plus the fact that you are paying down over $500 per month in principal.

It’s true that both of the impact cash flow, so he does need to make sure he can handle this.
But when comparing to rent, both the 401k loan and principal paydown are zero net change to net worth and should be considered as such.

The 401K loan is simply a transfer of funds from one account (his checking account) to another account (his 401k). This is a zero change in net worth.

That brings the comparison down to …
Own: 2850
Rent : 2200

The difference ($650) is less than your new Accord payment. If you consider that he would be paying down principal at $500 per month (in the first year). It is really a modest difference in cost compared to renting (using change in net worth as the cost).

Consider what happens over 5 years :
In 5 years, rent is likely to have increased by a couple hundred bucks. The principal paydown would be nearly $700 per month.

Consider what happens over 7 years:
In 7 years, rent will likely have increased by 250 bucks a month. The principal paydown would be about $750 per month and PMI could be removed as the loan would drop below the threshold for PMI removal. At that point his monthly cost could be considerably cheaper than rent. All this assumes zero net change in house price over the next 7 years.

[(former)FormerSanDiegan]

[quote=Scarlett]

I thought it was $3200. Anyhow, $900 difference wouldn’t be a modest car payment. $400-500 would be. My 3 yr loan payments on a new Accord are close to $700/mo. It’s true about the 401k loan, that it goes back to him eventually; I was thinking about his cash flow.[/quote]

2400 + 450 + 250 = 3100. But I won’t squabbnle over $100.

You should consider that you account for the $250 you are paying yourself back, plus the fact that you are paying down over $500 per month in principal.

It’s true that both of the impact cash flow, so he does need to make sure he can handle this.
But when comparing to rent, both the 401k loan and principal paydown are zero net change to net worth and should be considered as such.

The 401K loan is simply a transfer of funds from one account (his checking account) to another account (his 401k). This is a zero change in net worth.

That brings the comparison down to …
Own: 2850
Rent : 2200

The difference ($650) is less than your new Accord payment. If you consider that he would be paying down principal at $500 per month (in the first year). It is really a modest difference in cost compared to renting (using change in net worth as the cost).

Consider what happens over 5 years :
In 5 years, rent is likely to have increased by a couple hundred bucks. The principal paydown would be nearly $700 per month.

Consider what happens over 7 years:
In 7 years, rent will likely have increased by 250 bucks a month. The principal paydown would be about $750 per month and PMI could be removed as the loan would drop below the threshold for PMI removal. At that point his monthly cost could be considerably cheaper than rent. All this assumes zero net change in house price over the next 7 years.

[(former)FormerSanDiegan]

[quote=Scarlett]

I thought it was $3200. Anyhow, $900 difference wouldn’t be a modest car payment. $400-500 would be. My 3 yr loan payments on a new Accord are close to $700/mo. It’s true about the 401k loan, that it goes back to him eventually; I was thinking about his cash flow.[/quote]

2400 + 450 + 250 = 3100. But I won’t squabbnle over $100.

You should consider that you account for the $250 you are paying yourself back, plus the fact that you are paying down over $500 per month in principal.

It’s true that both of the impact cash flow, so he does need to make sure he can handle this.
But when comparing to rent, both the 401k loan and principal paydown are zero net change to net worth and should be considered as such.

The 401K loan is simply a transfer of funds from one account (his checking account) to another account (his 401k). This is a zero change in net worth.

That brings the comparison down to …
Own: 2850
Rent : 2200

The difference ($650) is less than your new Accord payment. If you consider that he would be paying down principal at $500 per month (in the first year). It is really a modest difference in cost compared to renting (using change in net worth as the cost).

Consider what happens over 5 years :
In 5 years, rent is likely to have increased by a couple hundred bucks. The principal paydown would be nearly $700 per month.

Consider what happens over 7 years:
In 7 years, rent will likely have increased by 250 bucks a month. The principal paydown would be about $750 per month and PMI could be removed as the loan would drop below the threshold for PMI removal. At that point his monthly cost could be considerably cheaper than rent. All this assumes zero net change in house price over the next 7 years.

[(former)FormerSanDiegan]

[quote=Scarlett]

I thought it was $3200. Anyhow, $900 difference wouldn’t be a modest car payment. $400-500 would be. My 3 yr loan payments on a new Accord are close to $700/mo. It’s true about the 401k loan, that it goes back to him eventually; I was thinking about his cash flow.[/quote]

2400 + 450 + 250 = 3100. But I won’t squabbnle over $100.

You should consider that you account for the $250 you are paying yourself back, plus the fact that you are paying down over $500 per month in principal.

It’s true that both of the impact cash flow, so he does need to make sure he can handle this.
But when comparing to rent, both the 401k loan and principal paydown are zero net change to net worth and should be considered as such.

The 401K loan is simply a transfer of funds from one account (his checking account) to another account (his 401k). This is a zero change in net worth.

That brings the comparison down to …
Own: 2850
Rent : 2200

The difference ($650) is less than your new Accord payment. If you consider that he would be paying down principal at $500 per month (in the first year). It is really a modest difference in cost compared to renting (using change in net worth as the cost).

Consider what happens over 5 years :
In 5 years, rent is likely to have increased by a couple hundred bucks. The principal paydown would be nearly $700 per month.

Consider what happens over 7 years:
In 7 years, rent will likely have increased by 250 bucks a month. The principal paydown would be about $750 per month and PMI could be removed as the loan would drop below the threshold for PMI removal. At that point his monthly cost could be considerably cheaper than rent. All this assumes zero net change in house price over the next 7 years.

[(former)FormerSanDiegan]

[quote=Scarlett]

I thought it was $3200. Anyhow, $900 difference wouldn’t be a modest car payment. $400-500 would be. My 3 yr loan payments on a new Accord are close to $700/mo. It’s true about the 401k loan, that it goes back to him eventually; I was thinking about his cash flow.[/quote]

2400 + 450 + 250 = 3100. But I won’t squabbnle over $100.

You should consider that you account for the $250 you are paying yourself back, plus the fact that you are paying down over $500 per month in principal.

It’s true that both of the impact cash flow, so he does need to make sure he can handle this.
But when comparing to rent, both the 401k loan and principal paydown are zero net change to net worth and should be considered as such.

The 401K loan is simply a transfer of funds from one account (his checking account) to another account (his 401k). This is a zero change in net worth.

That brings the comparison down to …
Own: 2850
Rent : 2200

The difference ($650) is less than your new Accord payment. If you consider that he would be paying down principal at $500 per month (in the first year). It is really a modest difference in cost compared to renting (using change in net worth as the cost).

Consider what happens over 5 years :
In 5 years, rent is likely to have increased by a couple hundred bucks. The principal paydown would be nearly $700 per month.

Consider what happens over 7 years:
In 7 years, rent will likely have increased by 250 bucks a month. The principal paydown would be about $750 per month and PMI could be removed as the loan would drop below the threshold for PMI removal. At that point his monthly cost could be considerably cheaper than rent. All this assumes zero net change in house price over the next 7 years.

[(former)FormerSanDiegan]

[quote=Scarlett]

I didn’t consider property taxes since it’s kind of a wash with interest deduction, IIRC.

$2400 P&I, $450 PMI, $250 for 401K loan (for the 5%), $100 for insurance.Assume his rent is $2200/mo. Assuming no HOA, or MRs.[/quote]

Assuming the taxes and tax write-off are a wash.
This totals 3100.

However, $550 + per month is principal … and the 401K loan is being paid directly to his retirement account.

Of course there is opportunity cost (or alternatiuvely a benefit if the retirement account declines during the loan payback period) in the 401k loan.

But these numbers, with PMI come pretty close to Rent + a car payment.
My rule of thumb for a new homeowner is if you can buy a house for rent plus a modest car payment in San Diego, it’s worth driving your old beater of a car.

If he can come up with the cash to eliminate PMI, it seems more than reasonable to buy, given those numbers.

[(former)FormerSanDiegan]

[quote=Scarlett]

I didn’t consider property taxes since it’s kind of a wash with interest deduction, IIRC.

$2400 P&I, $450 PMI, $250 for 401K loan (for the 5%), $100 for insurance.Assume his rent is $2200/mo. Assuming no HOA, or MRs.[/quote]

Assuming the taxes and tax write-off are a wash.
This totals 3100.

However, $550 + per month is principal … and the 401K loan is being paid directly to his retirement account.

Of course there is opportunity cost (or alternatiuvely a benefit if the retirement account declines during the loan payback period) in the 401k loan.

But these numbers, with PMI come pretty close to Rent + a car payment.
My rule of thumb for a new homeowner is if you can buy a house for rent plus a modest car payment in San Diego, it’s worth driving your old beater of a car.

If he can come up with the cash to eliminate PMI, it seems more than reasonable to buy, given those numbers.

[(former)FormerSanDiegan]

[quote=Scarlett]

I didn’t consider property taxes since it’s kind of a wash with interest deduction, IIRC.

$2400 P&I, $450 PMI, $250 for 401K loan (for the 5%), $100 for insurance.Assume his rent is $2200/mo. Assuming no HOA, or MRs.[/quote]

Assuming the taxes and tax write-off are a wash.
This totals 3100.

However, $550 + per month is principal … and the 401K loan is being paid directly to his retirement account.

Of course there is opportunity cost (or alternatiuvely a benefit if the retirement account declines during the loan payback period) in the 401k loan.

But these numbers, with PMI come pretty close to Rent + a car payment.
My rule of thumb for a new homeowner is if you can buy a house for rent plus a modest car payment in San Diego, it’s worth driving your old beater of a car.

If he can come up with the cash to eliminate PMI, it seems more than reasonable to buy, given those numbers.

[(former)FormerSanDiegan]

[quote=Scarlett]

I didn’t consider property taxes since it’s kind of a wash with interest deduction, IIRC.

$2400 P&I, $450 PMI, $250 for 401K loan (for the 5%), $100 for insurance.Assume his rent is $2200/mo. Assuming no HOA, or MRs.[/quote]

Assuming the taxes and tax write-off are a wash.
This totals 3100.

However, $550 + per month is principal … and the 401K loan is being paid directly to his retirement account.

Of course there is opportunity cost (or alternatiuvely a benefit if the retirement account declines during the loan payback period) in the 401k loan.

But these numbers, with PMI come pretty close to Rent + a car payment.
My rule of thumb for a new homeowner is if you can buy a house for rent plus a modest car payment in San Diego, it’s worth driving your old beater of a car.

If he can come up with the cash to eliminate PMI, it seems more than reasonable to buy, given those numbers.

[(former)FormerSanDiegan]

[quote=Scarlett]

I didn’t consider property taxes since it’s kind of a wash with interest deduction, IIRC.

$2400 P&I, $450 PMI, $250 for 401K loan (for the 5%), $100 for insurance.Assume his rent is $2200/mo. Assuming no HOA, or MRs.[/quote]

Assuming the taxes and tax write-off are a wash.
This totals 3100.

However, $550 + per month is principal … and the 401K loan is being paid directly to his retirement account.

Of course there is opportunity cost (or alternatiuvely a benefit if the retirement account declines during the loan payback period) in the 401k loan.

But these numbers, with PMI come pretty close to Rent + a car payment.
My rule of thumb for a new homeowner is if you can buy a house for rent plus a modest car payment in San Diego, it’s worth driving your old beater of a car.

If he can come up with the cash to eliminate PMI, it seems more than reasonable to buy, given those numbers.

[(former)FormerSanDiegan]

UCGuy – Affordability in San Diego is at a multi-generational low right now. If you can comfortably afford what you want with 10-20% down and have a decent cash cushion, I say go for it.
Just take your time. I don’t think the situation in terms of pricing will change much over the next 6-12 months.

[(former)FormerSanDiegan]

UCGuy – Affordability in San Diego is at a multi-generational low right now. If you can comfortably afford what you want with 10-20% down and have a decent cash cushion, I say go for it.
Just take your time. I don’t think the situation in terms of pricing will change much over the next 6-12 months.

[(former)FormerSanDiegan]

UCGuy – Affordability in San Diego is at a multi-generational low right now. If you can comfortably afford what you want with 10-20% down and have a decent cash cushion, I say go for it.
Just take your time. I don’t think the situation in terms of pricing will change much over the next 6-12 months.

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