Plotting the Debt Reduction Course

Plotting the Debt Reduction Course

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It feels like it’s been months since I last accomplished a financial goal. In fact, it *has* been months. It’s getting me down.

I eliminated $28k+ worth of credit card debt way back on March 27 with a $508.13 payment to Chase Bank.

Seems like forever ago already.

There is a light at the end of the tunnel, though, for my next target — eliminating the PMI I’m charged each month on my mortgage bill.

Private Mortgage Insurance (PMI) – PMI is extra insurance that lenders require from most homebuyers who obtain loans that are more than 80 percent of their new home’s value. In other words, buyers with less than a 20 percent down payment are normally required to pay PMI.

PMI plays an important role in the mortgage industry by protecting a lender against loss if a borrower defaults on a loan and by enabling borrowers with less cash to have greater access to homeownership. With this type of insurance, it is possible for you to buy a home with as little as a 3 percent to 5 percent down payment. This means that you can buy a home sooner without waiting years to accumulate a large down payment.

Under HPA, you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80 percent of the original purchase price or appraised value of your home at the time the loan was obtained, whichever is less. You also need a good payment history, meaning that you have not been 30 days late with your mortgage payment within a year of your request, or 60 days late within two years. Your lender may require evidence that the value of the property has not declined below its original value and that the property does not have a second mortgage, such as a home equity loan.

I’ve got $1448 to go before I hit the magic 20% number when I can request that it be dropped. This will result in a $1k+ savings each year for me.

Right now, I’m sending $150 towards principle every Monday. My monthly mortgage payment knocks off $210 each month (increasing $5 each month). And to make each monthly payment a nice round number (it makes the checks easier to write), I also send an additional $45 that is applied directly to principle.

I’ve already paid the mortgage for June so the numbers for the rest of the month are pretty simple to calculate. There are 3 Mondays remaining this month, so subtract $450 from the total.

$1448 – $450 = $998

I’ll mail in the next mortgage payment (which is actually due August 1) in the first week of July. That will take at the very least another $255 off the total sum. The 4 Mondays in the month will total $600.

$998 – $255 – $600 = $143

On the current course, I’ll complete this goal on the first Monday in August. That isn’t very far away.

But July happens to be a 3-paycheck month for me, so providing that our upcoming vacation doesn’t go way over budget and property taxes on our vehicles don’t kick my butt, I’ll likely send in an extra $500 (or so) in July to really break past the magic number before submitting my request to Countrywide to have the PMI dropped.


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