Posted: Thu Feb 21, 2008 7:16 am Post subject: Info on paying PMI up front
I've read articles about buying out PMI or paying PMI up front but haven't talked to a lender that actually offers this program. A few months ago I was interested in doing a refinance on our mortgages and taking some cash out, we originally did an 80/15/5 loan. The 80% was on 30 year fixed and the 15% was on a 15 year fixed, which helped to avoid PMI. I was interested in doing one loan and paying PMI with a 20 year or 25 year fixed loan.
Guess what I'm asking is exactly how does the PMI buyout work? Is the amount based on a percentage of the loan? I assume it also matters what the Loan To Value amount is as well? Does a shorter term lower PMI or does it make it a higher risk loan and actually raise PMI. What lenders offer this type of program?
PMI buyout helps you to eliminate PMI either by paying an upfront PMI buyout fee or getting a slightly higher interest rate. The increase in the rate depends upon the amount you put as down payment or equity but it mostly increases by .2% to .35%.
If you go for the PMI buyout then you may have to pay a bit higher interest rates. Are you planning to stay in the home long enough? Then I think it is better to go with PMI as you may be able to remove the PMI after couple of years.
Do you have 20% equity? If so then you can refinance without paying PMI.
Feel free to ask if you have any further questions.
I plan to stay in the house at least 5 more years. The house is appraised at $235k and we owe about $202k so we have about 14% equity. Would need $14k down to get 20%, plus closing costs. Can't do it right now and I think PMI just increased with all the housing problems.
Since I would need about $20k to pay toward the loan to avoid PMI, I think I might come out better paying the $20k down on the smaller home loan and focus on paying it off? _________________
Posted: Tue Feb 26, 2008 10:28 pm Post subject: RE: pay off PMI and second loan
Hi dcrum,
What I can say here is, yours is a good decision to build up 20% equity fast so that you can eliminate PMI. And, then focus on paying off the 2 loans. But don't stop paying for one just to continue paying off the other. Better make both payments in time.
dcrum0
