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Info on paying PMI up front

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Icon Mini Profile dcrum0



Joined: 18 Feb 2008

Posts: 19



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PostPosted: 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?

Thanks for your answers.

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Icon Mini Profile jenkin7



Joined: 04 Jun 2007

Posts: 887



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PostPosted: Fri Feb 22, 2008 5:23 am    Post subject:

Hello Dcrum,

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%.
 
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Icon Mini Profile larry



Joined: 27 Jun 2007

Posts: 2966



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PostPosted: Tue Feb 26, 2008 5:31 pm    Post subject:

Hi Dcrum,

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.

Best of luck,
Larry
 
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Icon Mini Profile dcrum0



Joined: 18 Feb 2008

Posts: 19



10.17 Dollars($)

PostPosted: Tue Feb 26, 2008 8:02 pm    Post subject:

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?

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Icon Mini Profile jerry
jerry
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Joined: 17 Oct 2005



Posts: 539
Location: MICHIGAN


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PostPosted: 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.

Let me know your thoughts on this.

Thanks,

Jerry
 
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