Mortgage Experiences & PMI

Mike K

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Apr 11, 2008
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I'm getting really mixed messages so I figured I'd ask those that have been there and done that. We're looking for a mortgage. 3.5 - 5% down. I'm trying like a bitch to avoid monthly mortgage insurance because for a loan our size it would be $500 - $600 a month.

Is there any way to do this? I've read that with 5% down you can get rid of the monthly insurance and just have a slightly higher interest rate but I don't see any companies specifically making that claim and nobody really says anything until you start talking to a broker.

Is there a way to avoid this? If I'm paying a higher interest rate instead of MI does the higher interest rate end up costing me the same as MI would have?

Anything I should know otherwise that you wished you had known going into it?
 

Turk

Lt. Ron "Slider" Kerner
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Jan 21, 2008
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I would have saved 20% down going into it before just to not pay PMI. Back in the day, I believe you could do something goofy like get 2 loans to pay for the house, one at 80% and other other at 20%. This would "trick" the system into thinking you don't need PMI, but I don't think they do this anymore.
 

willizm

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May 13, 2009
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I think it comes with the territory when you don't put a solid chunk down on the house. Banks have to assume a fair amount of risk when taking such a little amount as down payment as the owner may be more likely to walk away from the mortgage. If you put 20% down then the banks would be more apt to loan at lower interest and without mortgage insurance as the risk is less and even if you did walk from the property they would likely not lose much on their end since the owner already paid at least 20% of the value of the property as opposed to 0-5%.
 

Mike K

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Apr 11, 2008
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I would have saved 20% down going into it before just to not pay PMI. Back in the day, I believe you could do something goofy like get 2 loans to pay for the house, one at 80% and other other at 20%. This would "trick" the system into thinking you don't need PMI, but I don't think they do this anymore.

They do. It's a piggyback loan. So you can do 80% on Mortgage 1, 15% on Mortgage 2 and then 5% down. I don't know if that works out to be cheaper or more expensive though.

As far as saving, I'd love to but a) 20% down of what we're buying is the cost of a house in Chicago and b) the market is moving upwards so fast out here that I'd never catch up with housing prices. By the time I have 20% down of the current price that amount will end up being 15% of the then current price. No bueno.
 

wombat

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Around here, from what I understand about it also, PMI is on the loan unless you're 80% of the loan. So if you put 5% down, it'd be on the loan until you pay down to 80%. I think mine is something like I can request PMI to be taken off at as low as 18% (re-appraisal needed, I assume), or it falls off automatically at 22%. (those are pay-down numbers, so 82% and 78% of the loan ammount)

I put 5% down when we bought our house, but our PMI is only like $80/mo.
 

Turk

Lt. Ron "Slider" Kerner
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Jan 21, 2008
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I'd have to know what the interest rate options are for the piggy back loan. If the values of homes are appreciating that fast out there, it wouldn't be long before you could refinance and get rid of the PMI. The problem is, I expect interest rates to go up VERY soon.
 

bimmer4life

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They do. It's a piggyback loan. So you can do 80% on Mortgage 1, 15% on Mortgage 2 and then 5% down. I don't know if that works out to be cheaper or more expensive though.

As far as saving, I'd love to but a) 20% down of what we're buying is the cost of a house in Chicago and b) the market is moving upwards so fast out here that I'd never catch up with housing prices. By the time I have 20% down of the current price that amount will end up being 15% of the then current price. No bueno.


What are you buying million+ house? Either way eat the PMI and add extra payments to the loan each month to pay it down so you can get PMI removed. It should not take you to long. Or do the 80/15 with the second at a severely higher rate and pay that one off quickly. Either way I don't know of any way to avoid eventually paying something.
 

sickmint79

I Drink Your Milkshake
Mar 2, 2008
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grayslake
I would have saved 20% down going into it before just to not pay PMI. Back in the day, I believe you could do something goofy like get 2 loans to pay for the house, one at 80% and other other at 20%. This would "trick" the system into thinking you don't need PMI, but I don't think they do this anymore.

10 down, borrow against it with HELOC, 10 from HELOC 80 from mortgage.
 

Mike K

TCG Elite Member
Apr 11, 2008
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Wtf are you buying that 20% is the cost of a Chicago home? 1.5 million dollar house?

Starter homes in LA proper are 1000ish square feet and $600,000+ unless you want to live in Compton. It's madness.

Mike, one of my best friends is a mortgage broker and he was telling me about a type of loan that avoids the PMI. I forget the exact details but can put you in touch with him if you want to get some professional advice. PM me if you want his number.

Absolutely, yeah. I'll PM. Someone told me tonight I could request up to a 2% seller concession to pay down MI. That is very enticing.

I'd have to know what the interest rate options are for the piggy back loan. If the values of homes are appreciating that fast out there, it wouldn't be long before you could refinance and get rid of the PMI. The problem is, I expect interest rates to go up VERY soon.

It's higher on the shorter term loan. It seems like a convoluted way of doing things to save a nominal amount of money. I don't believe home values with continue to ascend at the rate they are but you have literal one room cabins in Venice Beach selling for over a million so who knows. I'd rather not bank on it though.

I don't think interest rates are going up any time soon because they're floating the market right now. Cars, homes, etc. It seems like it's all manufactured demand based on the uncertainty of cheap money in the future forcing people to act now. It's speculation of course but either way in a market as high dollar as LA it's kind of a crap shoot. If rates go up values are going to go down which would prevent me from re-fing out of the MI and I wouldn't want to re-fi out to a higher rate anyhow. So I'd rather take the sure money up front.
 

cacicgtp7

Some Military Dude
Nov 9, 2008
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I'd have to know what the interest rate options are for the piggy back loan. If the values of homes are appreciating that fast out there, it wouldn't be long before you could refinance and get rid of the PMI. The problem is, I expect interest rates to go up VERY soon.

I doubt mortgage rates move much until the fed raises rates which from what I'm hearing could be as late as 1st quarter 2016 now. I've talked to a few people also that said that the first rate raise is partially already priced into current mortgage rates so they aren't expecting a huge surge after the first fed hike. More like the second (whenever the hell that'll be). We could be looking at sub 5% interest rates for a solid year or two. Good time for home buyers if they can find a place.
 

Turk

Lt. Ron "Slider" Kerner
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Jan 21, 2008
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I doubt mortgage rates move much until the fed raises rates which from what I'm hearing could be as late as 1st quarter 2016 now. I've talked to a few people also that said that the first rate raise is partially already priced into current mortgage rates so they aren't expecting a huge surge after the first fed hike. More like the second (whenever the hell that'll be). We could be looking at sub 5% interest rates for a solid year or two. Good time for home buyers if they can find a place.

Now is not a good time for a home buyer IMO, once rates hit 5% or higher, expect home values to drop.
 

Flyn

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[MENTION=4746]Flyn High Again[/MENTION] maybe your friend is thinking or talking about FHA or VA loans where you don't have to put down 20% and you still don't incur PMI.

Nah. It's something more complex with a conventional. From what I know, FHA gives a double hit with upfront PMI and regular PMI on less than 20% loans.
 

Mattstrike

Random Crazy Custom Car guy
Feb 13, 2014
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I'm getting really mixed messages so I figured I'd ask those that have been there and done that. We're looking for a mortgage. 3.5 - 5% down. I'm trying like a bitch to avoid monthly mortgage insurance because for a loan our size it would be $500 - $600 a month.

Define PMI. Some people lump property taxes, homeowners insurance, etc, into "PMI", in which case $600 a month on a $120k home sounds about right.

But if it's just the mortgage insurance, you're way out of my league, with your million dollar home :ugh:.
 

smug

Please go back to eating crayons
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Aug 4, 2007
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Define PMI. Some people lump property taxes, homeowners insurance, etc, into "PMI", in which case $600 a month on a $120k home sounds about right.

But if it's just the mortgage insurance, you're way out of my league, with your million dollar home :ugh:.

Lumping taxes and insurance into your mortgage is escrow, not PMI
 

Mike K

TCG Elite Member
Apr 11, 2008
13,214
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Define PMI. Some people lump property taxes, homeowners insurance, etc, into "PMI", in which case $600 a month on a $120k home sounds about right.

But if it's just the mortgage insurance, you're way out of my league, with your million dollar home :ugh:.

No, that's just PMI. And million dollar home doesn't carry the same prestige here as it does in Chicago. People hear million dollars and they're like "Oh that's nice! You bought a guest home for your nanny!".
 
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