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Bought my home new last year. FHA loan @ 3.875%. Did not have enough money to put 20% down since I lost money on my previous home. So the sale price of my home was $265k. Original loan amount was $258k. My current balance is $254k. Two other homes with the exact same floor plan have sold in the last year since I bought mine. They both sold for $270k. I know that with an FHA loan you have to pay PMI for a minimum of 5 years. The obvious solution is to just continue to make extra payments and then in 4 more years hopefully I will have paid it down enough to drop PMI. Since my PMI is $240 per month I would love to get rid of it sooner.
So I'm wondering if anyone on here has had any success on getting their PMI dropped earlier and how you did it. Or perhaps someone has some helpful tips. It's just very frustrating paying that money each month. And what's worse is that I can't deduct it on my taxes due to income restrictions.
Appreciate any suggestions
I think the only way to drop it is to refinance into a conventional but it doesn't sound like you have enough equity, house would have to be worth a little over $300,000 so you have an 80% loan-to-value ratio. Plus, then you'd have to pay closing costs of quite a few thousands and may even end up with a higher interest rate. That $240/month sucks and over 4 more years its $11,520 but that may not be that far off of how much you'd pay in closing costs plus higher interest, especially over the life of the loan.
fha is 78% or 5yrs..... whichever is longer.
no way to get around it
@MovingForward_2012 wrote:
I believe starting with 2012 taxes, PMI is now a tax credit, so starting with this year's taxes, you can write off PMI. But it seems like you are saying you weren't able to take advantage of this, this year?
Tax credit or deduction? A credit would be fantastic! Deduction is good too, but not nearly as good.
Edit: Looks like it's a tax deduction and only if you don't take the standard deduction, but itemize instead. We've always taken the standard but maybe that will change once we are homeowners.
http://money.msn.com/saving-money-tips/post.aspx?post=a9c7cefc-6079-4b82-afe2-29dae7c14e7d
How does the mortgage interest deduction work? You get to deduct the whole interest for the year or just part of it?
If it's the whole amount and then you add PMI too, then I could see how itemizing would definitely be more beneficial than taking the standard deduction. Looking at a quick mortgage calculator, based on 3.5% interest, we would pay approx. $10,500 in interest plus $3,600 in PMI in our first year for a total of $14,160, which is about $2,000 more than the standard deduction for 2013. There would probably be some other things that could be itemized as well so I can see how it would be beneficial.