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Old 09-12-2008, 11:01 AM
 
Location: Cary, NC
1,036 posts, read 3,630,193 times
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While most lenders offer LPMI (like renriq pointed out) there are some that are better than others. Not all lenders offer the same LPMI or even PMI options and the rates can differ by $50/month on a $300,000 loan depending on which company they use.

For LPMI the difference can be even greater. Some lenders I know charge a 2 point hit for LPMI at 95% LTV, while others have only a 1 point hit for the best qualified borrowers.

This can make a 1% difference in fees OR a .25% difference in interest rate. So while the broker may have more than 4 lenders that do LPMI, they might only have 4 with really good LPMI. Just a thought... not all programs are equal.

That said, no clue what rates will do. I am not a gambling man so I advise clients to lock if they do not want to take the risk... and if rates drop by .25% I will do all I can to renegotiate or resubmit the loan.
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Old 09-14-2008, 01:54 PM
 
Location: Southeast Georgia
65 posts, read 216,065 times
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Quote:
Originally Posted by VictorBurek View Post
Well, with the low fed fund rate, we got a weak dollar which caused oil and other commodities to increase in price. Just look at the price you paid for gas. This is called inflation. That is why even though the fed's where lowering rates, mortgage rates increased.
Our gas prices here jumped from $3.59/Gal Thursday to $4.35/Gal Friday. Today it's at $4.59/Gal. Now that's some hefty inflation all blamed on a hurricane when the fuel was already in the system.

My feelings on rate locks is anything under 6% is a great rate. Waiting on the hope that it'll drop more is risky as it can go up just as easy as it can go down. Unforeseen things happen. If you can get a great rate today and there is no immediate drop coming tomorrow, then why risk it?
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Old 09-14-2008, 01:58 PM
 
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pmi might get you a better rate because it's insured... I would just pay the pmi and lock in a better rate. you can always float down or have your broker switch the bank...
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Old 09-14-2008, 05:43 PM
 
Location: Fort Myers, FL
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traditionally PMI sucked, but it can be wrote off now, so its not so bad. but it still goes to nothing.
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Old 09-14-2008, 07:25 PM
 
Location: Cary, NC
1,036 posts, read 3,630,193 times
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Originally Posted by mortgage king View Post
pmi might get you a better rate because it's insured... I would just pay the pmi and lock in a better rate.

Who cares id its "insured", PMI is meant to protect the bank not the owner. So that "insurance" you are paying for is really a waste.

Lower rate or higher rate, PMI or no PMI... what matters is the final bottom line payment in most cases. If no PMI with a .25% higher rate saves you $150 a month, do you care that its a higher interest rate or do you care that you are saving $150/month on the payment?

They are both tax deductible so there is no difference there. There are a few cases in which PMI might be better than LPMI even if the payment is higher, but in most cases go for the overall payment and see which is lower.
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Old 09-14-2008, 08:34 PM
 
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The LPMI payment we are locked in at is a lower monthly payment. Also my income is too high so the PMI is not tax detuctible which is why we don't want to go that route.
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Old 09-14-2008, 09:00 PM
 
82 posts, read 282,056 times
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Quote:
Originally Posted by rcarrillo View Post
Who cares id its "insured", PMI is meant to protect the bank not the owner. So that "insurance" you are paying for is really a waste.

Lower rate or higher rate, PMI or no PMI... what matters is the final bottom line payment in most cases. If no PMI with a .25% higher rate saves you $150 a month, do you care that its a higher interest rate or do you care that you are saving $150/month on the payment?

They are both tax deductible so there is no difference there. There are a few cases in which PMI might be better than LPMI even if the payment is higher, but in most cases go for the overall payment and see which is lower.
A second mortgage is usually higher in rate so i would just pay the pmi
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Old 09-14-2008, 09:59 PM
 
Location: Cary, NC
1,036 posts, read 3,630,193 times
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Quote:
Originally Posted by mortgage king View Post
A second mortgage is usually higher in rate so i would just pay the pmi

Mr. King - I did not mention a second mortgage. LPMI (lender paid mortgage insurance) or no PMI loans (from portfolio lenders) are a single mortgage with no private mortgage insurance.

Typically you pay a higher interest rate for the option to have no MI. However, if the payment is less than you would have doing a loan with MI (or doing two loans as you mention) then why pay PMI and take a higher interest rate?

Same thing applies for a second mortgage. You need to look at the overall situation and the monthly payment. If the 80/10 or 80/15 is the lowest payment, do that. If the PMI is lower, do that. Often time LPMI will have the lowest payment, then that is the best option. Often it is, but of course like anything it depends on credit score, down payment, debt-to-income, etc.

Last edited by rcarrillo; 09-14-2008 at 10:08 PM..
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Old 09-21-2008, 08:16 PM
 
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One thing you may want to consider is the length of time that you are going to be in the house. Even if the payment on the LPMI loan option is lower, you have to remember that the interest rate is lower on the option with PMI and eventually you'll be able to drop the PMI - resulting in a lower payment overall. So, if you expect to be in the house long term and your PMI would drop off after only a few years, then you'd be better off paying the PMI outright for the lower interest rate.
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Old 09-21-2008, 09:24 PM
 
Location: Cary, NC
1,036 posts, read 3,630,193 times
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Quote:
Originally Posted by srimel View Post
One thing you may want to consider is the length of time that you are going to be in the house. Even if the payment on the LPMI loan option is lower, you have to remember that the interest rate is lower on the option with PMI and eventually you'll be able to drop the PMI - resulting in a lower payment overall. So, if you expect to be in the house long term and your PMI would drop off after only a few years, then you'd be better off paying the PMI outright for the lower interest rate.


That is exactly the time when PMI is better than LPMI

Even though it has a higher payment, if you think you can cancel PMI soon it might be the lesser of two evils. Its not just a matter of time, if you buy a home for $200,000 and its worth $225,000 then you might want to take PMI. Even though at purchase the lender will use the LOWER of sales price or appraised value to determine LTV, you can always go back later and cancel PMI based on appraised value (not for FHA loans however, those have special rules).

Of course you always have to keep in mind that with today's uncertain markets home values could decline. You might be paying down a loan but if home prices decrease or stay the same as now you might be paying PMI longer than you expected. Its often times to take the "sure thing" than bet on the future... much as many did on ARMs, I/O and other mortgages.
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