Should I take out a home-equity line of credit to pay down my mortgage to eliminate PMI?

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My husband and I are currently paying PMI (Private Mortgage Insurance) on our mortgage. (We have no second mortgages.) I know we need twenty percent equity in order to eliminate PMI, but I don’t think we’re quite there. Is taking out a home-equity line of credit to pay down the mortage a good idea? I know that we’d then have two loans to pay, but the PMI would be eliminate and all of our payments (minus the interest) would be going toward the loan rather that insurance. Is it possible to get a home-equity line of credit for 6%?

  1. Reply
    May 1, 2011 at 4:49 am

    Remember that PMI is based on 20% equity. So if your home has appreciated in value since you’ve bought it, you might have the 20%. Talk to the bank and see. We did and had PMI eliminated!

    Otherwise (to answer your question) the sooner you can eliminate PMI, the better. Sell blood if you have to (okay, that might be a bit much)

  2. Reply
    May 1, 2011 at 5:02 am

    To eliminate PMI you have to get an appraisal done to verify the your equity. An equity line of credit is a variable rate based on prime rate. I believe it is around 7-8% right now. I personally feel PMI is ok becuse HELOC’s are adjustable and you would end up paying more interest over time than insurance in most cases. You should contact your bank to see how and when eliminate you can stop paying this insurance (sometimes you cannot eliminate PMI for at least two years). If you calculate your interest payments on the HELOC to be less than PMI and you can pay the balance off quicker than having the insurance for two years then it’s a winner.

  3. Reply
    Kathleen M
    May 1, 2011 at 5:35 am

    Rather than take out a second mortgage why don’t you just pay the additional money toward the principal every month. That way you are paying down the principal, saving yourself from paying the additional interest and increasing your equity. Talk to your bank and see how far you need to go to get to the 80%. Also, don’t just assume once you get to the 80% that the bank will automatically knock off the PMI – you need to tell them in writing.

  4. Reply
    May 1, 2011 at 6:29 am

    You should just pay extra to the principal on your first mortgage. There is no need to take out another loan and I don’t understand why you would. Just write your mortgage payment for more than you have to pay and make sure they know it is to go toward the principal on your loan.

  5. Reply
    May 1, 2011 at 6:51 am

    Home Equity Lines Of Credit are usually adjustable rate loans based upon the prime interest rate witch today is at 8.25%. That is a base rate and may be higher for individual borrowers dependent upon their combined loan to value and credit scores.

    Your PMI will be automatically waived after 2 years as long as your payments have been on time and the market in your area is stable.

    You can analyze the viability of a line of credit option by computing your proposed line of credit payment compared to the PMI payment.

    If you’d like you can call me toll free at 800-971-4638 ext. 223 and I’ll help you get enough information together to make a good decision.

    No charge, no commitment, just glad to to help

  6. Reply
    May 1, 2011 at 7:21 am

    i don’t thing this is a good idea to take home equity line in order to pay your first mortgage. you will end up with higher payment- interest rates on equity lines are more then 8.25%- maybe you can get lover rate for a couple of months and in order for you to pay principal on this loan , you need to pay more, then your monthly payment ( it’s working like credit card- min. payment cover only the interest) why don’t you call any appraisal and ask about value check on your house? i agree with the answers before me to rather pay ore towards your principal on your mortgage.

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