Comments on: A Few Notes About Private Mortgage Insurance And Other Debts

By: tb

tb — Tue, 03 Jun 2008 21:58:40 +0000

I was talked into using an 90/10 mortgage by the mortgage company to avoid PMI. The 10% mortgage rate is 12%. In retrospect paying the PMI would have been cheaper than paying the 12%.

By: PT

PT — Mon, 10 Dec 2007 23:50:32 +0000

I’m interested in the other side of this program…the $250 Best Value Guarantee. Has anyone recieved their check yet? I can’t see to get my check.

I applied for two loan programs (BOA and DHI), was accepted to both. DHI ended up offering the best value. I jumped through all of BOA’s hoops to get the $250 and still haven’t recieved the check. Anyone else having this issue?

Thanks,

PT
Prime:Time:Money
http:ptmoneyblog.com

By: Andrea

Andrea — Sat, 11 Aug 2007 14:45:39 +0000

When considering to take PMI, remember it is now tax deductible if you make under $100,000 a year. If you make more than this the other alternative usually is to take an 80-10-10 or 80-15-5 depending on how much you put down. One mortgage would be an 80% loan, then a second mortgage would be either a 10% or 15% loan at a slightly higher rate, then the last 10% or 5% would be your down payment. My husband and I found in our recent mortgage quest that that 80-15-5 plan worked best for us because we couldn’t take the PMI deduction and the quote from Bank of America we got from their No Fee Mortgage Plus program (which gives you a loan with no PMI) was a wash to the 80-15-5 mortgage.

By: Tristan

Tristan — Sat, 11 Aug 2007 00:26:34 +0000

It is ALWAYS best to pay off your mortgage early. You should have said, pay off smaller debts first then pay off your mortgage.

A mortgage brings debt and risk into your life. The sooner you can own your home free and clear the better. If someone can’t put 20% down are they really ready and able to afford a home?

By: Byron

Byron — Fri, 10 Aug 2007 19:29:42 +0000

I hope that not everyone here is automatically planning on deducting the cost of PMI from their 2007 taxes. No one has mentioned that first of all you have to be below a certain income threshold (55K for a single person and 110K for married couples) and that the deduction has to be renewed on a yearly basis. So who knows if it will even be around next year? My wife and I are above that threshold and went through B of A to get a very resonable rate with no PMI while putting 5% down on our Seattle area townhouse. Our monthly payments are much lower than they would have been going the 80/15/5 or 80/10/10 route. We have very good credit and were told by several advisors to avoid HELOCs as it could potentially mess with our credit scores.

By: James Morgan

James Morgan — Fri, 10 Aug 2007 19:05:42 +0000

Ben, yes I did an 80/10/10 loan too. 10% down, 10% HELOC, and 80% fixed rate. I paid off the 10% HELOC within a year though.

By: Ben

Ben — Fri, 10 Aug 2007 17:32:05 +0000

5Cent-

Good for you guys. I had never considered that option but when my loaner laid it out for me, side by side with the regular loan with PMI, I couldn’t help but think why the heck don’t people do it this way instead?

By: Joshua

Joshua — Fri, 10 Aug 2007 15:10:37 +0000

Oh and you dont have to refinance to get rid of the PMI you just have to call financer and ask them to assess whether you are at 80% equity. I think legally they are required to assess them themselves as well.

By: Joshua

Joshua — Fri, 10 Aug 2007 15:05:38 +0000

There are others ways to avoid the PMI loss that haven’t been pointed out. The problem with PMI isn’t that its any large percentage. The problem is that you are basically setting that money on fire. To figure your calculation on what you save apply the portion you pay for PMI to the principal of your loan for instance.

There are acutally several other ways to avoid the PMI scam. Your statement: “This usually requires that your house be reassessed and it be shown that you currently owe less than 80% of the value of your home.”
Is actually only partially correct. Its not what you owe on the house it is what you owe on your primary mortgage.
The following loans are just an example of ways to get around paying PMI: 80/20, 80/10/10, or 80/15/5 loans. What does this mean? The first number is the amount you finance through a primary mortgage. The second number is an amount you finance through a secondary credit line or second mortgage, the third number is a down payment.

So for example if your house is 100,000.00 using an 80/10/10 you will finance 80,000.00 on a primary mortgage, 10,000.00 on a secondary mortgage, and 10,000.00 in cash. Another advantage to this is that your equity investment is usually accessible (though I would not advise it). The second advantage is you can effectively lower your payments sooner by paying off your secondary loan first.

There are ups and downs, and its not for everyone, but there are alot of options available if you know what to look for.

By: Lisa

Lisa — Fri, 10 Aug 2007 14:39:49 +0000

This is very helpful. Thanks everybody for chiming in. Does anyone know if these standards apply to buying a vacation home (well, it would be my ONLY home-keep an apt here) in Mexico? Anyone done business with a US lender to purchase property in another country?

By: fivecentnickel.com

fivecentnickel.com — Fri, 10 Aug 2007 14:39:24 +0000

Ben, we did an 80/10/10 and it worked out great.

By: Ben

Ben — Fri, 10 Aug 2007 14:09:39 +0000

Nobody heard of the 80/10/10 loan like I described earlier? I think it’s a much better route to take!

By: Chris

Chris — Fri, 10 Aug 2007 13:52:22 +0000

I tend to think the amount of each loan should be considered as well.

If I had a car loan of $20,000 at 7%, I would pay just under $1300 the 1st year in interest, $1150 the 2nd, $800 the 3rd, $480 the fourth, and $180 the 5th. That works out to a total of about $3.8k in interest over a 5 year loan.

If I had a mortgage for 250,000, the .6% PMI interest would equal $1480 the 1st year , $1430 the 2nd year, $1386 the 3rd, $1340 the fourth, and $1290 the 5th. That’s $6.9k in interest the first 5 years of a 30 mortgage.

After 5 years, I would have built up about 15% equity on the 250,000, not quite out of the PMI woods yet. In fact, I would need to wait until midway through the 7th year to reach the 20% equity of the $250k after almost $9k in interest.

I would recommend looking at the amount of interest you pay in terms of dollar value, not simply in terms of percentage of the loan.

By: Trent

Trent — Fri, 10 Aug 2007 13:24:48 +0000

My local credit union beat BoA by almost a full percentage point.

By: Resident Alien

Resident Alien — Fri, 10 Aug 2007 13:10:57 +0000

Hi there,

As far as I’m concerned, PMI is not an issue anymore. Bank of America’s No Fee Mortgage eliminates PMI for everyone.
For more information:
http://residentalieninusa.blogspot.com/2007/05/no-fee-mortgage-from-bank-of-america.html

My local credit union is also offering a similar program i.e. No PMI.

By: Chandra

Chandra — Fri, 10 Aug 2007 13:05:01 +0000

I believe that as of 1/1/07 PMI is now tax deductible along with your mortgage interest. Check with your accountant to determine if this is at the federal or your state level.

By: Trent

Trent — Fri, 10 Aug 2007 12:49:57 +0000

Pre-mortgage insurance versus private mortgage insurance: our mortgage handler actually used the first term, so that’s what I used in this article. I guess if using the term that a lending professional used “erodes my credibility,” I’m going to have to live with that.

By: plonkee

plonkee — Fri, 10 Aug 2007 11:09:40 +0000

@Tordr
Its the same situation in the UK, except that for the rates are for 100%, 95%, 90% and 75% mortgages.

By: Tordr

Tordr — Fri, 10 Aug 2007 09:13:16 +0000

In Scandinavian countries they do not have PMI, but the banks make you pay different rates based on how much money you put down. The bank quotes you rates for 100%, 80% and 60% mortgages. Currently the premium for 100% vs. 80% is about 1% interest and between 80% and 60% the difference is about 0,5%.

There is no automatic rate reduction, so you have to go to the bank to ask for a rate reduction once you own 20% of your house. I think having a PMI that goes away when you have paid 20% of your house is a cleaner way of doing things.

By: James Morgan

James Morgan — Fri, 10 Aug 2007 07:11:43 +0000

OK, take NYC and California out of the equation and virtually nobody in America needs 6 figures for a 20% down payment. You are the exception, not the rule.

The average home in America sells for under $250k. How much did Trent pay for his house? I don’t remember if he mentioned specifically, but I think he was looking at houses that were under $200k. And people in similar situations as him seem to be his target market, right?

Therefore, a 6 figure down payment is ridiculous to even mention unless it’s specifically referring to the minority of home buyers who live in high priced areas.