In 2008 when the housing market burst, our house went from a value of 223k, to 145k. EEK. It has been a long, slow climb back into the positive range. I check Zillow periodically and this is the first time it showed this number. My last check was about 2 months ago, and it was at 176k.
No, we aren't moving. No, we are not trying to take equity out of the house.
But we do have PMI that we so lovingly pay $133 a month toward. In January 2016, the PMI will drop off, as we will have reached our 5 year max. And the plan all along had been to apply the PMI payments toward debt repayment. However, if the value of house is more than 20% of the total loan, we can apply to have the PMI removed. From what I have read, FHA loans (which we have) sometimes require a 22% Loan to Value, but once you reach 22%, they HAVE to remove the PMI.
Of course this number is constantly moving since the value of the mortgage is going down (even a tiny bit) with each payment. But we are looking at the value of the house being between 215k-219 before any of this is possible.
My research has shown that we would need an appraisal (roughly $400 the last time we had one), but the lender has to be the one to pick the appraiser. That seems a little sneaky to me. I have read that there are appraiser that will do a "consult" for a small fee to at least let you know if you are in the ballpark. No sense in spending $400 in appraisal fees (which is 3 months of PMI) to have it rejected by the lender and to find out that the house isn't worth what we are hoping.
Let's pretend that January 2015 we hit all our target numbers (whatever those are). That is 12 months of PMI savings.
12 x $133 = $1596 minus assumed appraisal cost of $400 = $1196
That is $1196 that we will have extra per year for debt repayment!! There are too many variables to know exactly where that will be applied....most likely the credit card. This is going on the assumption that G-man's car will be paid off by then (or very close). The next debt on the list is the CC, so there ya go. Rough number show that it would shave off about 8 months of CC payments if the entire amount went there.
All of this is speculative. I have no idea for sure what the process is with our lender (currently BOA owns the mortgage) to remove PMI, but when we get into the ball park (ex, Zillow has the house at 212k, and we need 216k, based on our current mortgage), we will start the process. I plan to call this week just to find out what the process actually is so I am prepared.
I would love to shave a year off of the PMI. If it is anything less than 6 months, we will have to see if it is worth it. If the appraisal ends up costing us what we would have paid anyway...then we are at net zero.
Anyone ever do this? How did it go?