57

Private mortgage insurance protects the lender if you stop making your mortgage payments. It does not benefit the borrower, aside from the fact that many lenders require it if your down payment isn't large enough. Paying for PMI is essentially paying for insurance to protect someone else's investment - if you're not required to do it, there is no possible ...


24

The best way to understand insurance policies in general is to consider who gets paid, and under what circumstances. Simply put, PMI policies pay your lender. The condition under which they pay is if you default, and the bank is not able to recover the balance of the loan. If you buy a house for $100,000 with $10,000 down and a $90,000 loan, and then you ...


22

The typical home mortgage is amortized to give you a consistent payment amount through the duration of the loan. What you'll see is that each month a greater portion of your payment goes to principal rather than interest. When looking at loan calculators look for ones that show the full amortization schedule to get a good picture of how the variables ...


9

What does this indicate about rate prediction over the next few years? It indicates that the market believes that the near-term interest rate will drop below 2.89% (to bring the average down from 3.49% to 2.89%) over the next 5 years.


7

Not typically. The payment amount on a mortgage is typically fixed until the principal balance is paid off. If you make extra payments after origination, that payment reduces the amount of principal remaining, which reduces the amount of interest that is charged, which means that more of the fixed payment goes to principal, paying off the loan sooner. You ...


6

Initially, lets say I pay around 1000 USD (200 toward my principal and 800 towards my interest).(May not be accurate numbers) Now the balance left on my mortgage is 159,000. This is incorrect. Your balance is now $160,000 - $200 = $159,800. I realized through internet that the additional payments would only cut the down the 30yr term. That is, ...


6

Generally no. Mortgage loans are typically amortized up front, with a fixed payment every month. The proportion of that payment that applies to interest vs principal changes every month (more interest at first, when there is more outstanding balance) but the payment stays the same every month. If you pay "extra" and it is applied to principal, the lender ...


6

But if I live in one and rent one out, the bank only considers me having rental income of $4000. (The bank doesn't consider my rental expenses, but if I rent my own house out, the bank considers the extra income). Actually they will not credit you with rental income of $4000. They will assume that you will sometimes have months where the property is ...


6

Do I qualify for "First Time Home Buyer" in the first place? You don't qualify as a first-time home buyer. It doesn't have to truly be the first home you've purchased, but you can't have owned a house for the last two years. I could take out a loan against the 401K, right? Would there be tax implications for this? Would this be a qualified reason for ...


5

There are two reasons I can think of, but they both boil down to the reason that lender will give you a mortgage with PMI, and won't approve a loan without it. Assuming the lender requires PMI for all mortgages with less than a 20% down payment: If you can't come up with enough cash for at least a 20% down payment, you can either get the loan and pay the ...


4

How does depreciation deduction work in mortgages? Generally - not at all? Why should it? Depreciation is a tax element based on purchase price. Mortgage is a credit based on outstanding balance. Depreciation generally works like that: you have a loss from the loss of value of the home that is tax deductible (i.e. deducted from your income so you are ...


3

The benefit to the homeowner is that they get to buy the house with a lower downpayment than they would otherwise need. So to make up a case where you might reasonably want to pay PMI... Say it's just after the stock market crash of 2008. You have $50K in cash, you want to buy a house for $250K, but you also think that this would be a really good time to ...


3

The issue for the bank is that if you were to stop work today, will the house value be enough to cover their risks, and still have you be able to claim 20% equity. While it is true that the finished improvements should make the house more valuable, it isn't true that half done ones will make it more valuable. It can be viewed as dragging the value of the ...


3

Generally it depends. At least in europe bank offer 2 types of credits and mortgages: Fixed payment Fixed return on capital. In the first, the absolute payment is fixed and over time more and more of the capital goes towards paying back the principal. In the second, the rturn on principal is fixed and over time the monthyl payment (which includes return ...


2

This answer applies to the US. This may be different in other countries. Like the other answers have mentioned, over a typical fixed mortgage, the payment amount stays the same for the life of the loan. In a normal fixed rate mortgage, if you make a large payment towards your mortgage, you are shortening the amount of time you will make payments and this ...


2

This may depend on where you are and what type of mortgage you have, because most of the answers so far contract my direct experience! I have a pretty standard repayment mortgage with a building society in the UK.  When I made a big overpayment, I was told that they'd automatically reduce my monthly payments to keep the term the same; but I could (and did) ...


2

A proper appraisal is not usually done by a realtor, but realtors should know their markets and how to research. Apartments/condos/townhouses are usually much easier to price than single-family houses because there are many comparable units in a relatively small area that can be used to get a good ballpark estimate. Starting with the comparable units you ...


2

The appraisal determines how much the bank is willing to loan you (and what interest rate it will charge you. If you are buying a house for $250K with 20% down payment and wanting a mortgage of $200K, but the appraisal is $220K only, the bank won’t want to loan you more than $176K (or maybe $198K and charge you more interest since it would be a 10% down loan ...


1

You asked, If I were to pursue refinance now, will the fact that these projects are unfinished impact my appraisal? Positively or negatively? Based on the rather significant scope of your projects, it's likely there will be an impact. "Positive or negative" can't really be answered without a frame of reference and - of course - knowing the details of the ...


1

You stated, We have about 20% equity in the house... Did you base that figure on the current state or after the completed repairs? That should be the answer to your question. Note, even if you come in a little below 20%, you can still avoid PMI by bringing some cash at closing to cover the difference. For example, if you owe $206K and your house ...


1

How do I (and real-estate investors and people considering buying in general) proceed in coming down to a conclusion without attempting to low-ball the seller or aim to high, with such different ranges in hand? You are essentially trying to mimic what a seller does. Before they list the house on the market they ask several agents to prepare a ...


1

I would see if there is an official open register where you can check the taxation value of the real estate. In The Netherlands you can check https://www.wozwaardeloket.nl/index.jsp and get for every address the taxation value of the real estate. Although the market value is often slightly higher than the value listed in the register, it gives you an ...


1

This needs to be negotiated with the lender. Consider this: you get one 10000 USD loan with 200 USD monthly payment and another 40000 USD loan with 800 USD monthly payment with equal lengths. Then if you pay 10000 USD for the 10000 USD loan, obviously it will vanish so your monthly payments do really get reduced by 200 USD. However, if you have only one ...


1

Unless you refinance, making a large lump sum pre-payment won't alter the monthly payment amount. The effect it will have is to shorten the term, so the mortgage gets paid off sooner. Because the pre-payment goes directly to principal, the interest portion of each payment will go down (less principal to attract interest each month), so the principal portion ...


1

I'm guessing you were pre-approved at a Big 6 bank. They are expecting you to find a house that you want to live in that requires no tear-down. I would recommend contacting a mortgage broker and asking them. A mortgage broker knows far more lenders than the Big 6, and can find a lender who is interested in working with you. One way to structure the deal ...


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