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This looks great! A couple of comments: - some (large?) portion of mortgages will not allow PMI to be removed until you either a) inject cash to get to 20% equ

by runako 5y ago

This looks great! A couple of comments: - some (large?) portion of mortgages will not allow PMI to be removed until you either a) inject cash to get to 20% equity or b) get to the time in the amortization schedule when you are scheduled to get to 20% equity. That is, if your home increases in notional value by 20%, you still have to pay PMI. So the PMI line item should probably not terminate after 3 years. - It would be awesome to include a rent growth factor. When I bought my first house, my annual mortgage was > the amount my next-door neighbor paid to buy his (similar) house. (Which would be driven in part by rents at that time.) Part of the benefit of home ownership is insulation from rising rents, and adding a rent factor would capture that.

monkeybutton 5y ago
+1 to including some kind of rent-growth factor. Where I live the amount a landlord can increase rent every year is capped fairly low (like 3%?) and I stayed in the same apartment for 7 years. In the beginning my rent was market rate and by the end it was way below. By not bouncing around apartments every couple of years I saved a ton of money which I ended up using for a down deposit on a house. On paper the decision looks crazy because the mortgage payments are higher than the rent I was paying but it doesn't take into account that moving wasn't an option, I'd have to stay in the same place forever (or at least until I got "renovicted").
jrs235 5y ago
If your home value has increased you can usually ask/tell the lender you believe the value has increased enough that PMI should fall off and that you'd like/are willing to pay for an appraisal (typically a few hundred dollars). Or, if your loan is owned by Fannie/Freddie, you may not even need an appraisal if the new value/increase is within certain percent range. I know this because I spoke toy lender (a credit union) about getting an appraisal to remove PMI. Knowing the outstay loan amount was X I said of it appraises at X/.8 thenwe should be able to drop PMI. Lender called me back and said that X falls within Fannie/Freddie allowed range that an appraisal wasn't needed. This only works in a market where prices are increasing. Your mileage will vary depending on your lender.
- runako 5y ago
  > Your mileage will vary depending on your lender. This is why I raised the issue. Some big prominent lenders do not allow this practice. (IIRC Wells Fargo & BofA fall into this category; they hold roughly $600B of mortgages between them.) IMHO it's not something to bank on before purchase unless your lender is willing to write the specific terms into the mortgage. Reviewing the Fannie Mae requirements [1], it appears that you also need to either get to 75% LTV (not 80%) unless you have held the property for 5 years, so the 3-year timeout in the calculator is still not likely to be valid in many cases. (Also note the Fannie Mae requirements have changed in the last ~2 years and are subject to change going forward. I would not bank on this provision being exactly the same in 5 years.) 1 - https://servicing-guide.fanniemae.com/THE-SERVICING-GUIDE/Part-B-Escrow-Taxes-Assessments-and-Insurance/Chapter-B-8-Mortgage-Insurance/Section-B-8-1-Conventional-Mortgage-Insurance-Requirements/B-8-1-04-Termination-of-Conventional-Mortgage-Insurance/1040972451/B-8-1-04-Termination-of-Conventional-Mortgage-Insurance-05-15-2019.htm#Borrower-Initiated.20Termination.20of.20Conventional.20Mortgage.20Insurance.20Based.20on.20Current.20Value.20of.20the.20Property https://servicing-guide.fanniemae.com/THE-SERVICING-GUIDE/Pa...
- notwhereyouare 5y ago
  Mine won't let me remove PMI early if value has risen until I have 2 years of payment history with them. I'm just looking at refinancing as it will be appraised that should remove PMI since we'll have more than 20% with the new value
alach11 5y ago
Great point about the PMI. For rent growth, do you think I should use the home price appreciation rate or make a new rate? Right now rent goes up with inflation.
- runako 5y ago
  I would make a new factor, so that people can input expected increases for their areas. I would expect many urban areas will continue to see rent increases far in excess of the broader inflation number. Rents may not track home prices due to supply issues.
  - ska 5y ago
    There are also jurisdictions with capped rent increase amounts, which can be in favor the other direction
    - runako 5y ago
      Genuinely curious, having lived in 6 major metros across 5 states from coast to coast. Are these jurisdictions anything like common? Where are some of them? I would love to do some further research. I've heard of rent-stabilized units, but never an area where rent increases are capped.
      - ska 5y ago
        I had colleagues living in Ontario (Canada), perhaps just limited to Toronto? Anyway they had rent increase caps based on age of building which was surprising [1]. Also California has something like this since 2020 if I understand correctly. Some areas of UK also. I'm sure there are more. [1] If I recall correctly there was a process to apply an above-limit increase if you could demonstrate expenses, say a renovation.

by runako 5y ago

monkeybutton 5y ago

+1 to including some kind of rent-growth factor. Where I live the amount a landlord can increase rent every year is capped fairly low (like 3%?) and I stayed in the same apartment for 7 years. In the beginning my rent was market rate and by the end it was way below. By not bouncing around apartments every couple of years I saved a ton of money which I ended up using for a down deposit on a house. On paper the decision looks crazy because the mortgage payments are higher than the rent I was paying but it doesn't take into account that moving wasn't an option, I'd have to stay in the same place forever (or at least until I got "renovicted").

jrs235 5y ago

If your home value has increased you can usually ask/tell the lender you believe the value has increased enough that PMI should fall off and that you'd like/are willing to pay for an appraisal (typically a few hundred dollars). Or, if your loan is owned by Fannie/Freddie, you may not even need an appraisal if the new value/increase is within certain percent range. I know this because I spoke toy lender (a credit union) about getting an appraisal to remove PMI. Knowing the outstay loan amount was X I said of it appraises at X/.8 thenwe should be able to drop PMI. Lender called me back and said that X falls within Fannie/Freddie allowed range that an appraisal wasn't needed. This only works in a market where prices are increasing. Your mileage will vary depending on your lender.

runako 5y ago
> Your mileage will vary depending on your lender. This is why I raised the issue. Some big prominent lenders do not allow this practice. (IIRC Wells Fargo & BofA fall into this category; they hold roughly $600B of mortgages between them.) IMHO it's not something to bank on before purchase unless your lender is willing to write the specific terms into the mortgage. Reviewing the Fannie Mae requirements [1], it appears that you also need to either get to 75% LTV (not 80%) unless you have held the property for 5 years, so the 3-year timeout in the calculator is still not likely to be valid in many cases. (Also note the Fannie Mae requirements have changed in the last ~2 years and are subject to change going forward. I would not bank on this provision being exactly the same in 5 years.) 1 - https://servicing-guide.fanniemae.com/THE-SERVICING-GUIDE/Part-B-Escrow-Taxes-Assessments-and-Insurance/Chapter-B-8-Mortgage-Insurance/Section-B-8-1-Conventional-Mortgage-Insurance-Requirements/B-8-1-04-Termination-of-Conventional-Mortgage-Insurance/1040972451/B-8-1-04-Termination-of-Conventional-Mortgage-Insurance-05-15-2019.htm#Borrower-Initiated.20Termination.20of.20Conventional.20Mortgage.20Insurance.20Based.20on.20Current.20Value.20of.20the.20Property https://servicing-guide.fanniemae.com/THE-SERVICING-GUIDE/Pa...
notwhereyouare 5y ago
Mine won't let me remove PMI early if value has risen until I have 2 years of payment history with them. I'm just looking at refinancing as it will be appraised that should remove PMI since we'll have more than 20% with the new value

alach11 5y ago

Great point about the PMI. For rent growth, do you think I should use the home price appreciation rate or make a new rate? Right now rent goes up with inflation.

runako 5y ago
I would make a new factor, so that people can input expected increases for their areas. I would expect many urban areas will continue to see rent increases far in excess of the broader inflation number. Rents may not track home prices due to supply issues.
- ska 5y ago
  There are also jurisdictions with capped rent increase amounts, which can be in favor the other direction
  - runako 5y ago
    Genuinely curious, having lived in 6 major metros across 5 states from coast to coast. Are these jurisdictions anything like common? Where are some of them? I would love to do some further research. I've heard of rent-stabilized units, but never an area where rent increases are capped.
    - ska 5y ago
      I had colleagues living in Ontario (Canada), perhaps just limited to Toronto? Anyway they had rent increase caps based on age of building which was surprising [1]. Also California has something like this since 2020 if I understand correctly. Some areas of UK also. I'm sure there are more. [1] If I recall correctly there was a process to apply an above-limit increase if you could demonstrate expenses, say a renovation.