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.
Answers | 4
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.
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