I'm not super financially savvy. How do you "get rid of" PMI?
From my understanding, you pay off 20% of your loan (including your down payment). We are close to that.
Correct. PMI is usually applied to loans where you did not put down the "conventional" 20% down payment, so it falls off when you get down to the 80-20 ratio you would have been at with a conventional loan.
There are some non-conventional loans where you wouldn't have PMI (USDA loans come to mind).
We have savings but it's not necessarily for baby. If you have any debts (student loans, cars, etc besides the house) I would recommend using the money to pay those off first. It's amazing how easy it is to save with no debt! We followed the Dave Ramsey plan.
This is what we're doing too. We have an emergency fund of 3 months of one of our incomes (they're roughly the same) and now we're focusing on paying stuff off. Thanks to a few unexpected bonuses from work early last year and the rental income we were getting from one of H's coworkers renting our spare bedroom for the last 2 years, we've been able to pay down close to $20k in student loans, another $5k in credit card debt and we saved up enough to put new carpets and laminate flooring in the house.
Is the Dave Ramsey plan the one where you pay off your biggest liability first, then the littler ones? Or is it the plan where you pay off the highest interest rate?
You pay off the smallest debt first. When that's paid off, you roll that payment plus whatever else you can afford into the next one and so on. It's called a debt snowball.
Okay, so we spend about 9% of our take home on rent. I know that's crazy low, but we've "grandfathered" in to lower rent than the rent our newer neighbors in the complex pay. Its a blessing, and one of the main reasons we haven't moved or bought a house. Plus, we have been able to afford saving up for 2 awesome vacations overseas.
From my understanding, you pay off 20% of your loan (including your down payment). We are close to that.
Correct. PMI is usually applied to loans where you did not put down the "conventional" 20% down payment, so it falls off when you get down to the 80-20 ratio you would have been at with a conventional loan.
There are some non-conventional loans where you wouldn't have PMI (USDA loans come to mind).
I am also pretty sure that is does not just automatically fall off. You actually have to get to your house reappraised and go through paperwork and whatnot to prove to the bank that you owe less than 80% of your house's value. If the market has changed these values can change, so unfortunately it is not based solely on what your loan amount is.
We are at 27%, which includes our property taxes. We decided to spend more on our mortgage at this house since property taxes were super cheap. Also, we don't have water bills since we are on a well. Overall our utilities are much lower in this home, compared to our first.
We have about 2800 sq ft, 3 baths, 4 bedrooms, finished basement etc.
This is what we're doing too. We have an emergency fund of 3 months of one of our incomes (they're roughly the same) and now we're focusing on paying stuff off. Thanks to a few unexpected bonuses from work early last year and the rental income we were getting from one of H's coworkers renting our spare bedroom for the last 2 years, we've been able to pay down close to $20k in student loans, another $5k in credit card debt and we saved up enough to put new carpets and laminate flooring in the house.
Is the Dave Ramsey plan the one where you pay off your biggest liability first, then the littler ones? Or is it the plan where you pay off the highest interest rate?
You pay off the smallest debt first. When that's paid off, you roll that payment plus whatever else you can afford into the next one and so on. It's called a debt snowball.
We paid down a large chunk of our debt with the snowball. Our student loans are so high that we consider them like a mortgage in his total money makeover. But the snowball changed our lives for the better.
I am also pretty sure that is does not just automatically fall off. You actually have to get to your house reappraised and go through paperwork and whatnot to prove to the bank that you owe less than 80% of your house's value. If the market has changed these values can change, so unfortunately it is not based solely on what your loan amount is.
Ours falls off automatically at 78/22. It's not a very high PMI so probably won't be worth paying for and dealing with an appraisal when we hit 80 unless a lot changes around here in the next couple years!
We can request it be removed at 80%. If we do, the bank would do a review and approve/deny. It will automatically fall off at 78% for us as well. Actually, if I'm remembering accurately, I believe our bank told us it was a requirement to take it off automatically at 78%. Not sure if that was a bank regulation or if it's a law.
I just read the blog and he does say to pay the smallest to give you quick feedback so you are more likely to stay with the plan (aka immediate gratification). When I worked at an advisory firm I ALWAYS used the highest interest rate plan and I'm sticking with that philosophy!!!
Highest interest rate makes sense to me unless the smaller balance is so small you should just pay it off to get rid of it.
Excluding my mortgage, at one point I had 2 student loans and my car loan. I paid off the student loans with the highest rate first, now I moved onto paying my car down faster, then I'll move on to the remaining student loan.
We can request it be removed at 80%. If we do, the bank would do a review and approve/deny. It will automatically fall off at 78% for us as well. Actually, if I'm remembering accurately, I believe our bank told us it was a requirement to take it off automatically at 78%. Not sure if that was a bank regulation or if it's a law.
I can't remember either I just know it was written in that pile of papers we signed in November!
Haha, yea. This past November was 2 years for us in our house so I'm definitely just working from memory too.
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