The PrivateMI Equation: 10 Percent Down, 10 Percent for Renovations
Unlike many young couples, when Kim and James Cavanaugh decided to trade in their rented townhouse in Annapolis for a home in Arnold, Maryland, coming up with the down payment was easy: They had saved money during the years they worked on pleasure boats in the Caribbean because most of their living expenses had been covered.
What they hadn’t planned on was buying a “fixer-upper” that needed significant renovations to be livable.
But the needed repairs didn’t prove to be much of a stumbling block. With the help of private mortgage insurance (PrivateMI) from PMI Mortgage Insurance Co. of San Francisco, and Jeff Reilly of Weichert Financial, the Cavanaughs were able to put down 10 percent to buy their home and still have an equal amount left over to help them renovate.
“We had the money to put down a 20 percent down payment, but when we found this house, there was so much we wanted to do with it. It only made sense to put 10 percent down and use the other 10 percent for renovations,” said James, a 32-year-old chef for Bon Appetit in Washington, DC.
Although the four-bedroom home had a nice layout, it wasn’t in very good shape when Kim found it. “The house had been owned by a family and had gotten very run down during the father’s illness,” explained Kim, 32, who works in real estate for Coley, Reed and Associates in Bethesda, Maryland. “Not only was the house in need of attention, but the carpeting was so dirty you didn’t want to walk on it barefoot.”
Despite the house’s outward appearance, Kim realized its potential the moment she saw it. The 3600- square-foot structure was spacious and had lots of light. She also liked the fact that it had a wood-burning fireplace, a large kitchen, and enough room for two home offices.
By reducing their down payment with PrivateMI, Kim and James were able to afford to dramatically change the appearance of their new home without dipping into their emergency fund. They put down hardwood floors, recarpeted, and repainted the whole house. The couple was also able to pay for a host of needed repairs, such as replacing the porch, which had fallen away from the foundation of the house.
In spite of the work, James was hooked by the fact that the house not only has a back and front yard, but also a big enough side yard for their sailboat. “In the old place, we had no backyard and just a little stoop,” he recalled.
Even their cats, Bailey and Oakley, are delighted with their new abode. “They love this place because we have a screened-in porch and we leave it open all the time. Although outside,“ says Kim.
Both Cavanaughs agree on the financial advantages of owning their own home:
“We decided to buy a house because we didn’t want to pay rent – it’s kind of like just giving away money, paying someone else’s mortgage, and not building any equity,” James explains. “We’re paying about one-and-a-half times what we were paying before in rent. With the tax advantage, it will be cheaper than our rent was, and we have a lot more space.”