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PMI will automatically be removed at 78%, this is correct, at 80% you have the ability to try to have it removed but must go through the hoops.
Now for your situation I wouldnt waste time on a 2nd or double up payments to try and pay down your mortgage because frankly in this market there is no telling where the value of your home will be in the next few years.
My suggestion, talk to your loan agent about Split Edge MI or Single Premium MI. The MI rate wont be too expensive at 82% and you should be able to get out of a hefty MI payment per month or get rid of it all together.
Split Edge: just like FHA you can pay an Upfront payment and then a very low monthly payment, keeping your monthly obligation as low as possible
Single Premium: you will pay for the MI upfront and will not have to worry about any monthly payments for the rest of the time you have the mortgage regardlesss of its value or how much you owe.
Both are great options and should save the the headache and interest that would be wrapped up in a 2 nd mortgage and the hassle of making extra payments and hoping you can pay down the principle enough to have it removed.
Good luck on your new home and I hope it all works out!
If I were you, OP, I would try to save up the $$ to put down the 20% and avoid PMI altogether..As you can see from all the responses, it isn't exactly a "done deal" in terms of removing it.
I just refinanced and asked my bank whether I could remove PMI if I put down a large downpayment toward the new loan, and the loan officer got really nasty with me and said PMI would not come off until the loan reached a specific date (2017, when the 80% LTV was scheduled to be reached). I spoke to their manager and got the same word - basically it didnt matter how much $$ I put down, there was no way around getting PMI tacked onto my new loan even if I was able to remove it on my OLD loan (I refi'ed under HARP 2.0 based on being underwater but was prepared to pay down 30% toward the new loan to avoid PMI).
What REALLY sucks is that I have a new 30 year mortgage and PMI wont come off until I reach 80% of the NEW loan's value (which is when the principal balance reaches $132,000 and thats not going to happen as I owe almost $200K on the new loan). For me, PMI will NEVER go away and my BIGGEST regret when buying my condo was not putting that @#%^&%#@ 20% down!!! NEVER AGAIN!.:cryi ng:
Again, we are talking 2% here. If it is a $250,000 purchase we are talking a 2nd mortgage of $5,000. Who cares if the rate is higher...it is only on $5k which you could probably pay off in 1 or 2 years anyway. You won't have to deal with crazy PMI underwriting AND you will never have to deal with PMI in any fashion, which as you can see above can be a real pain in the arse.
Thank you for such great suggestions and links. I think we are going to trying and save up that difference to put the 20%. We are just soooo close and my husband and I went over our finances and I think we might be able to save it up in three months so hopefully I can negotiate a closing date. I did call my mortgage broker to ask how much it would cost and he said it would be around $80 a month on a $320,000 purchase. He did explain exactly what everyone else said about reaching that 78% and it will automatically drop off. I am going to try and not go down that road with PMI.
I hope I can get some more answers to my PMI dilemma. We were going to put the 20% down but unfortunately, it's not gonna happen since we are purchasing a house that is a bit more than expected so it puts me $18,000 short. (purchasing a $360,000 house and putting 15% down on 15 year fix conventional loan)I wanted to get some advise on options to avoid PMI. Would I be able to get a separate loan for this money and if so how does one do it? I would actually be able to pay that $18,000 loan back by March, 2013 which is why I hate having that PMI on my loan. Any advise would be appreciated. Also, why doesn't extra payments to the principal help get rid of the PMI faster? They only use that LTV percentage?
Would I be able to get a separate loan for this money and if so how does one do it? I would actually be able to pay that $18,000 loan back by March, 2013 which is why I hate having that PMI on my loan. Any advise would be appreciated.
You can get a second lien. Your loan officer should have contacts who can set that up for you.
Quote:
Originally Posted by jojo7
Also, why doesn't extra payments to the principal help get rid of the PMI faster? They only use that LTV percentage?
When PMI can be dropped is often based on loan investors' and GSE (Fan/Fred) policies. An insured loan is a safer asset for them.
You can get a second lien. Your loan officer should have contacts who can set that up for you.
When PMI can be dropped is often based on loan investors' and GSE (Fan/Fred) policies. An insured loan is a safer asset for them.
Tell me if you with agree with this statement I read on a website. If you are close to the 20% down, the second loan doesn't make sense and to just go for the PMI. Would you agree? I appreciate your response.
Tell me if you with agree with this statement I read on a website. If you are close to the 20% down, the second loan doesn't make sense and to just go for the PMI. Would you agree? I appreciate your response.
Where are you getting the $18,000 figure?
Assuming $360,000 appraised value, you are getting a loan for $306,000, since you are putting 15% down. The PMI would automatically drop at 78%, or $288,000. (Remember for automatic drop-off it's based on the ORIGINAL amortization schedule, extra payments don't help.)
I ran some rough figures assuming a 3.875% rate and a 30 year loan. It would take over four years to reach that balance.
Since you plan to pay off the second very quickly, it seems like that would be the better way to go.
Tell me if you with agree with this statement I read on a website. If you are close to the 20% down, the second loan doesn't make sense and to just go for the PMI. Would you agree? I appreciate your response.
I would probably agree with that statement if the LTV was very close to 80%.
Tell me if you with agree with this statement I read on a website. If you are close to the 20% down, the second loan doesn't make sense and to just go for the PMI. Would you agree? I appreciate your response.
I would not agree. I think the exact opposite. Read my posts on this thread.
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I spoke to their manager and got the same word - basically it didnt matter how much $$ I put down, there was no way around getting PMI tacked onto my new loan even if I was able to remove it on my OLD loan (I refi'ed under HARP 2.0 based on being underwater but was prepared to pay down 30% toward the new loan to avoid PMI). 
