drop PMI before 2 years if principal reductions
drop PMI before 2 years if principal reductions
Borrowers own current home and have lots of equityy. Wish to buy a larger home, 5% down and when they sell their current home (after buying new one) to do a principal reduction and drop PMI before two years.
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1
When you buy a larger home, you will have to take out a new mortgage. If you wish to avoid PMI, you can pay 20% down payment for conventional loans. Dropping the PMI will solely depend upon the equity that you have developed on the property.
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Did you save enough money in order to avoid the PMIs? What is the amount that you have in your savings account? Don't take the plunge into taking out a mortgage loan without having enough savings.
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Yes they can do what you describe. But.......there may be a better way.
Many lenders offer what is known as an 80/15/5 or 80/10/10 which is an 80% LTV first mortgage, a 15% or 10% LTV second mortgage with a 5% or 10% downpayment.
There is no PMI on these loans and when they sell their existing home and pay off the second mortgage on the new home their monthly payment will be lower than doing a principal reduction on one loan.
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But jhelwell... Do lenders really offer 80/15/5 or 80/10/10? As far as I know most of the lenders have stopped giving such loans after the real estate crisis.