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October 16, 2007
Threshold for Mortgage Insurance?
I was thinking of putting 15% down on a place I want to buy, but a friend just told me that anything less than 20% would trigger mortgage insurance. Is this true? I have good credit, no debt, overall good finances, etc.
Comments
Yes your friend is correct, PMI (Private Mortgage Insurance)is extra insurance that lenders require from most homebuyers who obtain loans that are more than 80 percent of their new home's value.
In other words, buyers with less than a 20 percent down payment are normally required to pay PMI. This has nothing to do with your debt, credit, or other finances.
Posted by: guest at October 16, 2007 2:20 PM
yes thats true.. get another loan for the other 5%
Posted by: guest at October 16, 2007 2:21 PM
What he said, you can always do a HELOC for the other 5% and the interest is deductable
Posted by: guest at October 16, 2007 4:15 PM
you want what is sometimes called an 80-5-15, which means 80% primary mortgage, 5% secondary, and 15% down. you can get a heloc or a fixed-rate loan for the 5%. you don't need the 5% from the same bank that gives you the 80%, although it may be more convenient to use the same bank for both.
Posted by: z at October 16, 2007 5:58 PM
A New Law makes PMI Tax deductible just like the interest on HELOC. You should calculate the net cost after tax savings under both scenarios.
Just keep in mind that the deduction for PMI phases out if your income is over $100K. IF that is the case, definately try to get the HELOC.
Posted by: newsouthsloper at October 16, 2007 10:01 PM
I just remembered that Bank of America has a program where you dont need to pay PMI or get a Heloc with anything over 10% down.
We ended up using another lender but this was a close second. Check it out - Pretty good program, but the APR was a little higher so be sure to measure the cost of all of your options.
Posted by: newsouthsloper at October 16, 2007 10:12 PM
Is it possible that you don't have to pay PMI if you put down less than 20% of the PURCHASE PRICE, but your appraisal comes in high enough that you have 20% or more EQUITY? A mortgage broker suggested this to me at some point in the stupifying process of shopping for my house and financing...
Posted by: gowanusaurus at October 17, 2007 11:11 AM
Gowanusaurus, where can i get more information about the appraisal offsetting the pmi... can you give me the name of the mortgage broker you used. I'm due to close in a week this could save me some bucks!
Posted by: guest at October 17, 2007 11:44 AM
You're supposed to pay PMI until you have 20% equity in your house. It doesn't matter how you get to the 20%: because your property goes up in value and the bank appraises it higher than when you bought it, because you've paid down a chunk of the principal, or because you get a piggyback loan, mentioned above (80/10/10, 80/5/15, 80/15/5, etc.). The hitch is, often the bank won't tell you that you no longer owe PMI. You have to keep track and let them know.
Amy
Posted by: Anonymous at October 18, 2007 11:55 AM
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