Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I recently did some research on PMI and decided that the cheapest option was single premium PMI. You pay a lump sum at closing and never have to pay PMI monthly.
The rates I found online were around 1.75 points due at closing with the PMI calculators, so I was quite happy when I was quoted 1% and 1.25% by different lenders - 5% down. You'll likely need to be in the highest credit tier to qualify for this.
Considering that FHA is 1% fee PLUS .85% and even conventional loan PMI is around .7% a year, the single premium is a no brainer. It will pay for itself in a little over a year and will then save me $200 a month until I reach 80% LTV (since I'm not paying monthly PMI). You also don't have to go through the hassle of getting it removed.
It will also save money over a 10% second lien. It depends on the rate, but you will be ahead after 2-3 years.
It is also classified as points on the mortgage loan so it will be tax deductible as mortgage interest (key if you make too much or the PMI deduction is not extended).
Depending upon your tax situation, an MI premium added to your interest rate may be best for you, too. For example, if your rate is 4.5%, add to the rate 1%, to take the rate to 5%. (example only) Then the mortgage payment is calculated at the higher rate, over 30 years. It gives your MI a chance to be written off on taxes as part of your mortgage interest (especially if you are over the max income for MI deductions). On the down-side, if you are going to be there a long time, beyond where you would pay it down to an 80% LTV, it could be setting you up for a refi. However, if you plan to be gone in 5-7 years, it may make the most sense.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
