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I am not interested in paying PMI to hedge the risk of the bank. I'm not sure what the bold means, but the choice to put 10% down and not PMI versus to put 10% and pay PMI is an easy one and if I can I absolutely should.
Try asking in the mortgage forum-if these still exist, someone there will know.
I am not interested in paying PMI to hedge the risk of the bank. I'm not sure what the bold means, but the choice to put 10% down and not PMI versus to put 10% and pay PMI is an easy one and if I can I absolutely should.
It is unlikely you will find a big bank that will do this in NJ in today's market. There is too much price uncertainty for them to assume the risk of the 2nd loan. I'm sure you will find mortgage brokers who can get you this product, but I'm sure you are going to feel it on the interest rate. The average interest rate on a HELOC loan is about 4.5% for a 5 year loan and pushing 7% for a 30 year term, a conventional 30 year mortgage rate is at 3.5% so you are paying double the interest for that 10% over the same term. There are also additional fees for taking out the 2nd loan. Do the math for yourself but you might find that either paying the PMI or buying out the PMI upfront(which is also an option) to be cheaper. My personal opinion is that piggy back mortgages are a shady product for banks to offer AND for consumers to buy for the reasons stated.
Last edited by Goldendoodle1969; 04-27-2016 at 08:51 AM..
I was offered Wells Fargo loan for 3.75 for 30 year with 10% down and no pmi. Trick is you need the equivalent of six months expense in cash and pre-tax saving (IRA, 401k, etc). They also offered the same deal but a 35 rate if I had the full 20% down plus the 6 months of saving tax/nontax.
I was offered Wells Fargo loan for 3.75 for 30 year with 10% down and no pmi. Trick is you need the equivalent of six months expense in cash and pre-tax saving (IRA, 401k, etc). They also offered the same deal but a 35 rate if I had the full 20% down plus the 6 months of saving tax/nontax.
Yup we had pretty much the same thing, and the PMI we pay is only $120 on a property valued over $400k.
We also qualified for 80/10/10 if we wanted to go that route. The main loan would have been like 0.25% higher and the second loan was almost 6%. So even if we focused on paying off the second loan faster we still would have been left with a main loan 0.25% higher then our current.
By going the PMI route we can let our monthly payments, appreciation, and some additional payments do the work. So long as we have the PMI removed within 4 years it will have been the better option. With a few upgrades and extra payments this shouldn't be hard at all, just get an appraisal, pay the difference if you come up short and BOOM pmi gone. I think the PMI route vs 80/10/10 is only costing us like $30 more a month but in the long run will save us thousands.
Yup we had pretty much the same thing, and the PMI we pay is only $120 on a property valued over $400k.
We also qualified for 80/10/10 if we wanted to go that route. The main loan would have been like 0.25% higher and the second loan was almost 6%. So even if we focused on paying off the second loan faster we still would have been left with a main loan 0.25% higher then our current.
By going the PMI route we can let our monthly payments, appreciation, and some additional payments do the work. So long as we have the PMI removed within 4 years it will have been the better option. With a few upgrades and extra payments this shouldn't be hard at all, just get an appraisal, pay the difference if you come up short and BOOM pmi gone. I think the PMI route vs 80/10/10 is only costing us like $30 more a month but in the long run will save us thousands.
Yup looks like the banks are back up to their old tricks...some people never learn. I hope the next time a housing collapse happens people's debts are not forgiven through foreclosure and they have to wear them around their necks like a scarlet letter until they are repaid. Without PMI you should not be able to purchase a house with less than 20% down.
Yup we had pretty much the same thing, and the PMI we pay is only $120 on a property valued over $400k.
We also qualified for 80/10/10 if we wanted to go that route. The main loan would have been like 0.25% higher and the second loan was almost 6%. So even if we focused on paying off the second loan faster we still would have been left with a main loan 0.25% higher then our current.
By going the PMI route we can let our monthly payments, appreciation, and some additional payments do the work. So long as we have the PMI removed within 4 years it will have been the better option. With a few upgrades and extra payments this shouldn't be hard at all, just get an appraisal, pay the difference if you come up short and BOOM pmi gone. I think the PMI route vs 80/10/10 is only costing us like $30 more a month but in the long run will save us thousands.
Not to mention if you wen through Wells their 2nd loans are variable rate so have fun with that 2nd loan when the rates go up.
Yup looks like the banks are back up to their old tricks...some people never learn. I hope the next time a housing collapse happens people's debts are not forgiven through foreclosure and they have to wear them around their necks like a scarlet letter until they are repaid. Without PMI you should not be able to purchase a house with less than 20% down.
Mind you we have a dual income family, overall income above $150k and a credit score in the 800s. So maybe its not so easy to qualify for the 80/10/10 for the average Joe as it was 10 years ago. And as I mentioned it would have given us a higher rate which is why we decided to bypass it. We could have put down 20% but with rates as low as they are it didn't make much sense still having student loans at higher rates and I wanted to have a strong emergency fund. Works for some, shouldn't work for all.
Even with the 10% down our housing cost should only be about 20-22% of our monthly income next year. Totally depends on each individual situation. A single income family making $60k a year with housing taking up 35% of monthly income and a credit score of 680 should absolutely have to put down 20%. A dual income family with perfect credit, proof of funds in the bank, and housing costs below 25% should be able to put down just about whatever they want in my opinion.
Mind you we have a dual income family, overall income above $150k and a credit score in the 800s. So maybe its not so easy to qualify for the 80/10/10 for the average Joe as it was 10 years ago. And as I mentioned it would have given us a higher rate which is why we decided to bypass it. We could have put down 20% but with rates as low as they are it didn't make much sense still having student loans at higher rates and I wanted to have a strong emergency fund. Works for some, shouldn't work for all.
Even with the 10% down our housing cost should only be about 20-22% of our monthly income next year. Totally depends on each individual situation. A single income family making $60k a year with housing taking up 35% of monthly income and a credit score of 680 should absolutely have to put down 20%. A dual income family with perfect credit, proof of funds in the bank, and housing costs below 25% should be able to put down just about whatever they want in my opinion.
A family making 60k a year would be hard pressed to come up with 20% for a down payment, in NJ at least. On a very modest $250,000 home, that would be $50,000. It would take someone making 60k a year and supporting a family an extremely long time to save 50k. If what you're proposing would actually come to fruition, home ownership would be reduced drastically. Also, a larger down payment and PMI is required by banks to hedge against declining home value, not loan default. While a person with a 680 credit score and high debt to income ratio is obviously a higher risk than one with an 800 credit score and low debt to income ratio, it's unfair to ask for 20% down. The way to account for that added risk is simply to charge a higher interest rate.
I could also make the argument that a single income household making, let's say, 120k a year would actually be better off than a dual income household making about 160-170k when you account for childcare and other expenses, but I digress.
To the OP, several banks now have products where if your income is 80% or less of the median income in your county of you're buying in a low-to-moderate income area, you can get a conventional mortgage with less than 20% down and no PMI. Not sure if that applies to you but I thought it was worth mentioning.
Mind you we have a dual income family, overall income above $150k and a credit score in the 800s. So maybe its not so easy to qualify for the 80/10/10 for the average Joe as it was 10 years ago. And as I mentioned it would have given us a higher rate which is why we decided to bypass it. We could have put down 20% but with rates as low as they are it didn't make much sense still having student loans at higher rates and I wanted to have a strong emergency fund. Works for some, shouldn't work for all.
Even with the 10% down our housing cost should only be about 20-22% of our monthly income next year. Totally depends on each individual situation. A single income family making $60k a year with housing taking up 35% of monthly income and a credit score of 680 should absolutely have to put down 20%. A dual income family with perfect credit, proof of funds in the bank, and housing costs below 25% should be able to put down just about whatever they want in my opinion.
It's all well and good until the stock market crashes( which we are due for in the next 5-7 years), unemployment skyrockets, and your house value crashes. So you lose your job, can't afford to cash out of stocks which is where all of your safety net is, and you have to sell your house and guess what its worth less than the equity you have in it, sound familiar....wow were back in 2008 except its 2018. No one should be able to skirt PMI in my opinion unless you have a vault full of gold bars that is the equivalent value of your mortgage and let the bank hold onto the key to that vault until you hit 20% equity.
Spencer savings bank has several special programs that offer loans in nj for 10 % down, no PMI.
They are for borrowers in certain professions, income levels or homes in certain areas.
Not sure if this would apply to OPs situation.
Great experience recently with them.
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