Is there any way to avoid paying for PMI if you put a down payment of less than 20% on a home mortgage? I'll be putting 10-15% down.
I am looking to purchase a home in the Washington DC, MD, VA metropolitan area.
The only way to do that would be to take out a first and a second. But honestly it would most likely make more financial sense to go with the PMI and refi in a few years to drop the mortgage insurance. With the second, it's going to be a higher interest rate and may be adjustable. Plus your payments may end up being around the same even if you had the PMI. That's what I would recommend my client to do. But talk to a mortgage broker in your area and ask their opinion, preferably one who isn't going to get any money from you. | 01.14.16 @ 17:19
There is no free lunch :(
The two loan option is one (although finding a second mortgage over 80% financing that makes good financial sense might be tricky) way out, and there are a number of "no MI" products as well - but the mortgage insurance is still being paid for SOMEWHERE in the mix, so it usually results in a slightly higher interest rate. Short term, this is a lower monthly payment. Over enough time, the higher rate will cost more than a lower rate once the MI drops off.
If you're already putting 10-15% down, the cost adjustment for a "Lender Paid MI" product might not be a lot though. It makes sense to ask your lender, do the math (monthly savings vs how long you plan to be in the loan) and see what makes sense for you.
OR, just pay the MI for a few years. With that much equity at the start, you should have the loan paid down so the MI cancels all on it own fairly quickly. | 01.14.16 @ 20:15
I don't agree with a couple answers. There is no way to know what rates will be or if your home increases quickly in value a refinance at same rate may not be available and costly and dropping the MI only if value accelerates. I suggest you put 15% down, get a 30 year fixed rate second and it will be much cheaper in the long run. Compare a quote from a lender- lender paid MI, Borrower paid, Refundable MI, and no MI with piggyback. You will need a FICO middle score of 721 to get a great second and low rates on your first. Work on the score before you apply | 01.19.16 @ 20:43
I have to agree with Greg Fischer with regards to what we called Lender Paid MI in that it may not be too expensive and therefor may be worth it.
I have to disagree with Justin Clark when he suggests refinancing in a couple years. This assumes the house will go up in value (I believe it will but no guarantees) and he also does not mention what you do if the interest rates are higher. You likely would not refinance at a higher rate but you could wait and drop the MI down the road and keep your current rate.
Nobody asked what loan amounts you are talking about and how long you might be in the home. You need to quantify this decision with a total cost analysis and look into your 3 options which are GET MONTHLY MI, GET ONE TIME MI, GET A 2nd mortgage or HELOC.
I do not do loans in your state but I would be happy to connect you with someone who is who will do this for you | 01.19.16 @ 23:02