lender paid PMI or a piggyback loan for a 318,000property

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We are buying a 318,000 home with 10% down...we have the option of a lender paid PMI loan at 6.75% or a piggyback 80/10/10 at 6.375 for primary loan and 8.5% for the secondary loan of about 31,000...what would be our best bet for the monthly payments and then in the long run of 30 year fixed (over the course of loan savings on each). In addtion, the secondary 8.5%is a 30 year/15 year balloon loan? This process is so cumbersome and would really love expert advice. Thanks, Sarah

larry · Joined: 27 Jun 2007 Posts: 3328 473.51 Dollars($)

Hi sderrig.

Welcome to the forum.

The Lender paid PMI is not a good option as the lender will charge you a higher interest rate or a higher mortgage origination fee or even may be combination of the two. Why don't you try out Fixed Rate FHA loans? You can get the FHA loan with only 3 percent down payment. Feel free to ask if you have any further questions.

Best of luck,
Larry

ckalvesmaki · Posted: Thu Aug 21, 2008 5:44 am Post subject:

We are buying a 318,000 home with 10% down...we have the option of a lender paid PMI loan at 6.75% What is the rate without the LPMI? or a piggyback 80/10/10 at 6.375 for primary loan and 8.5% for the secondary loan of about 31,000...what would be our best bet for the monthly payments and then in the long run of 30 year fixed (over the course of loan savings on each). In addtion, the secondary 8.5%is a 30 year/15 year balloon loan? This process is so cumbersome and would really love expert advice. Thanks, Sarah

Hi Sarah..on the surface it appears that the 2 payments are pretty close. The lender paid MI is about 25 a month higher vs the 80/10/10 combo. Having said that....the difference in that payment will be eaten up quickly if you have to refi the 2 together at some point and there are minimal closing costs on the second as well which will eat into the monthly savings...Can you give us a bit more info about your GFE ie points etc.....I think you can do better on the rate......so you may want to check with another broker or lender...

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Also, is the second mortgage a fixed rate mortgage for the entire loan term? If not, I would consider shopping for a second mortgage that is fixed rate...I know there are some banks around here that actually offer 25 year fixed rate fully-amortized second mortgages for about the same rate as you quoted. (no balloon) To me, this would be preferable to LPMI loan. But I am more in favor of the LPMI than others who have posted- while it is true you would have the higher interest rate for the life of the loan, 6.75 is not a bad interest rate at all for LPMI! On FHA loans, you would have MIP (mortgage ins) on the loan for at least 5 years.

Remember to factor in the fact that interest paid on your mortgages is tax deductible and also, depending on your income, you may be able to deduct your PMI- although you may be in too high of an income bracket for this deduction.

vegas_storms · Joined: 12 Sep 2008 Posts: 50 1.24 Dollars($)

Lender paid PMI is rarely a good choice as it will NEVER be removed from your loan

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