does everybody get a @2nd..what happenned to MI or PMI ? why do banks push for the 20% down?

Question

after prices rebound shouldnt I be able to get rid of the PMI with an appriasal that shows 20% equity?

Answer 1

PMI isn't the bugaboo that it used to be considered. New legislation, effective this year, makes PMI tax deductible and, as of a few years back, the PMI companies are required to remove the requirement for PMI after roughly 2 years as long as payments have been maintained as agreed and market values in the area are not decreasing.

In some cases, it may still make financial sense to do an 80% first mortgage with a 20% second mortgage depending on the payments on the second as compared to the PMI payments, but not as much as it used to with the new tax advantages in many cases.

Most reputable lenders offer a full range of products and do not "push" for one or another but rather offer the borrower all available options so that those options may be fully explained and the borrower may make and informed decision.

If I can help further, please feel free to email me.

Answer 2

Banks would prefer if you never asked them for money, except they would go broke. They want you to prove that you need don't need money before they lend it to you.

Seriously, the more you have to put down, the better you look to them. It makes you look secure and safe. It also depends on your income and credit. The lower they are, the more they want you to put down and the less they want to lend to you.

Builders here in Toronto are now asking for 20-25% down on new condos, so that they have more money in hand and are not in debt to their bank as much. There were problems years ago when people bought new with no money down, then backed out when prices dropped. The bank had nothing to secure their loans against and bad things happened.

Don't count on prices rebounding where you are, it may or may not happen. We had a huge market surge here in 1989, which then crashed in 1990. We are back at around the same levels now, 17 years later. Prices should come back, but you never know when...

Laurin Jeffrey
Toronto Condos and Lofts
www.jeffreyteam.com

Answer 3

Reduces the amount of money the bank have to advance to the borrower which mitigates lending risk, since 20% down gives the borrower instant equity in the property.