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Anthony Said:

Is the fastest way to pay off a mortgage is to not pay any principal?

We Answered:

What your friend suggest is a valid option. He also is biased because he would make more money in commissions by making you do a refi, buy life insurance and set up a Roth IRA.

However, if your goal is to pay off your mortgage as fast as possible without changing your lifestyle, this is the best way to do it:
http://www.mortgage-accelerator.com/?jra…

However, you will need to have a positive cash flow every month to make this work. As a mortgage broker, this is the program I tell my clients about when they have a fixed mortgage rate and positive cash flow.

Regards

Rebuttle:
Anytime you can borrow money and make more than the interest rate you borrowed on while using tax laws to your advantage, you're investing correctly. That said, one must look at the risk factors and investing goals of the individual and make a decision based on their particular factors, such as their age, whether they have kids or not, are married, etc. Your investing goals might differ than mine.

Clifford Said:

What percentage does your monthly gross income goes toward the mortgage?

We Answered:

Lenders typically don't want you to spend more than 29-30% of your gross monthly income on your mortgage. I would go more conservatively and shoot for 22-25% of your gross income.

Learning from some of my friends, you don't want to live for your house, and situations change and change quickly especially given the looming recession and given that residential property values are estimated to fall another 10-20% in most areas.

In my opinion you would better off spending less and paying down on the mortgage more quickly to build equity.

Harry Said:

Anyone know benefits or drawbacks of PMI (Principal Mortgage Insurance)?

We Answered:

I usually recommend the the 2 loan option for tax purposes. You cannot deduct MI premiums off your tax return. but you can deduct the interest you pay on your second mortgage. This happens in most cases, but check with your tax advisor to confirm. Also, in most cases you may be able to refinance the second mortgage with out any pre-payment penalties.
However, there are new programs out there that simply roll the upfront MI premium into your loan amount so that you can get the best of both worlds. Ask your brokers if they have that option available.

The PMI does usually get you a lower rate and once your loan-to-value reaches 79% it is automatically dropped. However, as you noted: the monthly payments are very close for either option.

In a nutshell: If you plan on staying in this loan forever, then it makes sense to pay PMI. At some point the PMI will drop and you will have a fixed payment, assuming this is a fixed rate mortgage.
If you plan on refinancing in the future or selling your home, then you may want to try the 2 loan option.

Not very many people stay in their loans for 30 years any more...

Best of Luck!

Wesley Said:

Is PMI the kind of insurance generally paid with your mortgage along with Principal, Interest, and taxes?

We Answered:

PMI is not Home Owners Insurance. PMI is typically paid with your mortgage payment and it usually taken from your Escrow.

Home Owner's Insurance premiums are based on the value of your home, it's contents, the area in which you live. There are many factors that can determine the rate of homeowners. For a $130k house, you should expect to pay anywhere between $500-$1000 a year.

Douglas Said:

what is the difference between the principal, interest, and insurance of a mortgage?

We Answered:

Your lender is required to give you a "truth in lending" breakdown of actual costs prior to the closing. What you are looking for is the PITI part-- "Principal, Interest, Taxes, Insurance". If you are putting over 20% down, you don't have to have the taxes and insurance added to the mortgage payment amount, you can elect to pay those yourself when they are due.