Personal Loan to eliminate PMI

[voxombmx]

Can a personal loan be obtained to pay mortgage down to 80% LTV? If so, is the math as straight forward as it appears? Numbers used are obviously rounded for easy reading(math).

Appraised Value $178,000

30yr Fixed Conventional Mortgage at 3.25%

Mortgage Balance $156,400

PMI $206/mth until 7/1/2024 (63 months totaling $13,000)

Prequalified for $15,000 Personal Loan 5 years at 6.99%

$317/mth

$3,000 interest over loan life

Is it a simple as I can pay $3k interest vs $13k PMI and ultimately be $17k ahead mortgage principal balance?

[Revelate]

I truly don't know PMI, if it vanishes like a fart in the wind once you get to a percentage of your original loan balance (or current appraised value) then I think your plan absolutely has merit.

I think you still need to do the math at applying the additional money you'd be paying to the installment loan directly to the mortgage instead of taking out the loan, but I suspect you're going to come out ahead if the PMI gets kicked to the curb basically immediately.

Apologies way too tired and crankly to try to even napkin math it haha, breaking down and getting coffee this morning after this forum tour.

[Shooting-For-800]

Your PMI is $2500 per year on a $178k loan?

I don't think it is that simple and I would not do it.

I would either look at HELOCs or refinancing when you find a better rate and low closing costs and can eliminate PMI.

[tcbofade]

Don't forget DTI calculation. 

You'll have to count the personal loan payment in your new front AND back end DTI.

[CreditInspired]

---

@voxombmx wrote:

Can a personal loan be obtained to pay mortgage down to 80% LTV? If so, is the math as straight forward as it appears? Numbers used are obviously rounded for easy reading(math).

Home Value $178,000

30yr Fixed Conventional Mortgage at 3.25%

Mortgage Balance $156,400

PMI $206/mth until 7/1/2024 (63 months totaling $13,000)

Prequalified for $15,000 Personal Loan 5 years at 6.99%

$317/mth

$3,000 interest over loan life

Is it a simple as I can pay $3k interest vs $13k PMI and ultimately be $17k ahead mortgage principal balance?

---

I think the most important thing would be to get an appraisal first to make darn sure the LTV ratio is ~75%. You don’t want to take out a loan, apply it to mortgage, only to find out appraisal is coming in lower than $178K. 

Also I would check with lender and ask what is needed to get PMI dropped. I’m talking exact figures. 

Just my 2cents. 

[voxombmx]

---

@CreditInspired wrote:

---

@voxombmx wrote:

Can a personal loan be obtained to pay mortgage down to 80% LTV? If so, is the math as straight forward as it appears? Numbers used are obviously rounded for easy reading(math).

Home Value $178,000

30yr Fixed Conventional Mortgage at 3.25%

Mortgage Balance $156,400

PMI $206/mth until 7/1/2024 (63 months totaling $13,000)

Prequalified for $15,000 Personal Loan 5 years at 6.99%

$317/mth

$3,000 interest over loan life

Is it a simple as I can pay $3k interest vs $13k PMI and ultimately be $17k ahead mortgage principal balance?

---

I think the most important thing would be to get an appraisal first to make darn sure the LTV ratio is ~75%. You don’t want to take out a loan, apply it to mortgage, only to find out appraisal is coming in lower than $178K. 

Also I would check with lender and ask what is needed to get PMI dropped. I’m talking exact figures. 

Just my 2cents. 

---

I could have posted the exact figures down to the penny here but chose to use rounded figures for ease of typing and simply asking a question that I don't believe I have great understanding.

I'll edit my original post to reflect that the 178k is the current appraised value of the home.

Wells Fargo mortgage consultant stated that the LTV needs to be at 80% to remove PMI

[voxombmx]

---

@Shooting-For-800 wrote:

Your PMI is $2500 per year on a $178k loan?

I don't think it is that simple and I would not do it.

I would either look at HELOCs or refinancing when you find a better rate and low closing costs and can eliminate PMI.

---

I feel as though you missed the point of my question.  If I cannot pay the mortgage down to the 80% at this point, how would I refinance, pay closing and put money down to get to 80% LTV?

I'm simply asking if it is possible to not pay 13k over the next 63 months. The personal loan would go directly to principal, PMI would be eliminated once payment posts and we would then only incur the interest penalty on the loan. It makes sense to me but I do not know if there is something I don't see or understand?

[voxombmx]

---

@tcbofade wrote:

Don't forget DTI calculation. 

You'll have to count the personal loan payment in your new front AND back end DTI.

---

I'm not sure I understand this? If loan is for 15k and then that is directly subtracted from mortgage principal, would we not be net zero?

We effectively have $600/month that is now "free" after both of our 36 month vehicle loans were paid as of 3/7. If we chose to put the $600 month directly toward the principal of the home we still wouldn't reach 80% LTV for almost 3 years.  I'd much rather put that money back toward the personal loan rather than continuing to pay for PMI if possible.

[Anonymous]

Personally I would NOT trust wf. They will have done at your expense another appraisal. Their numbers will probably come up short. Be prepared for several more thousand dollars to put in to this  

[Kforce]

---

@voxombmx wrote:

Can a personal loan be obtained to pay mortgage down to 80% LTV? If so, is the math as straight forward as it appears? Numbers used are obviously rounded for easy reading(math).

Appraised Value $178,000

30yr Fixed Conventional Mortgage at 3.25%

Mortgage Balance $156,400

PMI $206/mth until 7/1/2024 (63 months totaling $13,000)

Prequalified for $15,000 Personal Loan 5 years at 6.99%

$317/mth / $3,000 interest over loan life

Is it a simple as I can pay $3k interest vs $13k PMI and ultimately be $17k ahead mortgage principal balance?

---

A mortgage loan rate is determined by your credit profile which includes every thing.

Credit scores, utilization, debt to income ratio, other debt (loans, child support, back tax's), etc.

If you add a "New Ppersonal Loan", all those factors shift and they could cancel the mortgage offer, or at a minimum change the interest rate. (higher)   Same is true if you take the mortgage loan.  You scores and profile will shift and the personal loan numbers will most likely change.  After a mortgage post, you might be able to get a personal loan however the interest rate would likely be higher and the loan amount lower.

1.  Make sure that the PMI falls off if you pay mortgage down below 80%, with no added cost.

      ( Not stuck with full $13000 loss, if you pay down faster )

2.  Lock in your mortgage at best rate possible and pay the PMI

3.  Look at the feasibility of getting a personal loan to get below the 80%  threshold.

      ( Maybe even with the new mortgage you can get enough at a decent rate to make it work )

4.  If you can't get the personal loan, you could just pay extra every month.

      A couple hundred every month on mortgage will save you 2 years off PMI, and gain some equity.

5.  Don't take out a personal loan before mortgage closes or get a new credit card.