PMI versus Income Property

3 Replies

My husband and I need advice. We are interested in becoming landlords. We purchased our first home in Dec 2012 with an amazing interest rate and 3% down. Our plan was to stay in the home for a few years and then rent it out. Our plans were expedited when my husband's job relocated us to Chicago. We have rented our home to a 3 year renter. We are eager to buy another rental property. Unfortunately, since we only put 3% down on our home, we are paying PMI. My husband and I are odds as to what to do. I want to take 20% and purchase another rental home for 100K or less, he wants to pay whatever necessary to eliminate the PMI. Currently the renter is paying the PMI and after 3 years of renting, I believe our house will have enough equity to request that the PMI be waved/removed. However, he believes it will be less riskier to pay off the PMI now. Any advice would be greatly appreciated. Thanks!

Your property may have appreciated enough to over come the 20% depending on what market your home is in. And after two years on the loan the PMI can be removed if 20% loan to value has been reached.

How much is your PMI per month?

How much cash flow would you clear if you buy another rental property?

The PMI is annoying, for sure, but not worth the dollars toward another property (especially because your loan was 3%!!!). Like the gentleman above said, it probably expires soon. Just call your mortgage company to confirm when. Some expire at 20% and others have sneaky mandatory PMI-payment dates put in to your contract, whereby even if you pay off the property to its 20%, you still have to pay it until that mandatory pay-till date unless an appraiser verifies that it is still worth the value you paid for the property. Usually, that appraisal costs more money than the extra PMI they have you for, so you end up paying the extra PMI. Hopefully this did not happen to you, but if it did, I've been there. Call your mortgage company, see what the deal is. Hope this was helpful!

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