PoFU Podcast

038 | Listener Questions - HELOCs & PMI

Episode Notes

Addressing 2 listener questions in Episode 38:

• Should I use a HELOC for a home improvement project? While every situation is different, the basis for our answer is to determine whether your home improvement project is a NEED or a WANT? If you have a repair that needs immediate attention (roof leak, failed mechanicals, foundation issue, etc) and you don't have the cash handy, then YES you should use your HELOC to address that issue. Or if you have a dire NEED for extra space to accommodate children, roommates, family then go for it. However, if you simply WANT and updated kitchen or WANT to update your landscaping, then we would not advise using a HELOC.
• Should I refi my mortgage at a higher interest rate if it eliminates my PMI? Quick refresher, most situations a homeowner needs to have 20% equity (house value minus mortgage balance = equity) to eliminate PMI. Many homeowners that bought houses even a year ago with more than 80%+ LTV have seen their home values increase and in many cases their equity has increased due to higher home sales in their neighborhood. A year ago interest rates were in the 3% range but today we are in the 5% range. The answer to this question boils down to the math and your old payment to new and also consider the total interest cost by refinancing at a higher interest rate. That said, you might not need to refi at all. Call your bank, explain your situation, and a simple appraisal might be all you need. 

Keep the questions coming and thanks for listening!