is it better to get a mrotgage w/ PMI?

Answer 1

PMI is deductible if your income is less than $100,000 per year. It phases out at 10% per $1000 over that, being completely non-deductible after $110,000 in income. It's only for loans originated in 2007 so far, and may not last past the year, though I'm betting it will.

What you'll usually find is that an 80/15 structure will offer you lower payments. Even though the 2nd mortgage is at a higher rate, at least that higher rate is only assessed on 15% of the amount. Unlike PMI, which is charged against the entire loan amount.

However, PMI can be dropped after as little as 2 years, if your home appreciates or you pay down principal enough to get below 80% loan-to-value. In current market conditions, it may take 3-5 years or more for your house to gain 15-20% in value though, being that we're probably only going to see 3-5% gains at best in most markets.

So, if you're in the same loan, and same house, for more than say 5-7 years, having a loan that you were able to drop PMI on, you'd ultimately have a lower payment going forward and save money in the long-term. But, 90% of loans are paid off through a refi or sale within 7 years.

It's not hard to find a fixed-rate 2nd mortgage, at least one that is a 30 year payment with a 15 year balloon (commonly called a 30/15 balloon). The balance is due after 15 years, but again, there's a 90%+ chance the loan will be long gone before that. But this will mitigate the rate risk of a variable line of credit (though many lines of credit also offer fixed-rate conversions nowadays too).

Also, it's not unusual that your total closing costs are lower with an 80/15. You shouldn't pay an origination fee on the 15% 2nd, and many banks will pay the closing costs on the 2nd mortgage for you as well. My clients save an average of $500-800 in closing costs doing the 80/15.

They both have their upsides. It all depends on what you are most comfortable with. A good loan officer can take the time to show you all the options, and help advise you, so you can make the best decision for your personal situation.

Answer 2

Since it costs you money, it's better to avoid PMI if at all possible.

Sometimes you can do 2 mortgages with an 80/20 or 75/25 split and avoid PMI but you need to carefully compare the total costs of going that route. The second on a splt often is a variable rate mortgage, sometimes with a fairly short rate-lock period. Once it floats to market rate your cash flow may be much worse than the PMI would have been on a single note.

For new purchases in 2007, PMI is now tax deductible. The law as it's currently written will expire at the end of the year unless Congress acts to extend it.

Answer 3

PMI is an insurance policy guaranteeing the loan (basically a co-signor to your loan) but it is also akin to paying a higher interest rate because you are a higher risk. And, what makes it a higher risk is that the mortgage company doesn't have as much play in the value of the property vs. the value of the loan. Mortgage companies want to make sure that they get enough of a downpayment on a property that even if the value of the property drops, it will still be higher than what is owed on it.

If you do, however, get a mortgage with PMI, reassess the value in whatever time frame they allow (I believe the norm is two years that you are required to carry PMI). If the value of the house has increased enough and you've paid down the mortgage enough to get to 80/20, then you can drop the PMI. You will just need to send a request and a copy of an appraisal to the mortgage company. You will have to pay the cost of an appraiser out of your pocket, but it can save you money in the long run if the value of the house is increasing fast. Otherwise, the mortgage company will wait until you get the balance down to 80% of the original price of the house, which may take forever depending on how close you got to the 20% downpayment to begin with. I think by law they are required to drop it at that point (but don't quote me on that.)

Answer 4

PMI is tax deductible now so it depends on what kind of interest rates you can get with and without it. Talk to a broker to see. We were able to find some rates without PMI, but the interest was a little higher. We opted to go with one that had lower interest and the PMI because we would be able to get rid of the PMI as soon as we can prove the house was worth 10% more. Then we will have NO PMI and the lower interest rate!

It really depends on what kind of loan you qualify for!

Answer 5

It depends. Even though pmi is now tax deductable, you are usually better off going with a 80/15/5 loan or a 80/10/10 loan wit the second loan being at a higher rate(1.5-2 % higher). Of, course if you have 20% you dont have to worry about any of that crap. PMI is only required on loans with under 20 % down.

Answer 6

you need to look at the different payments either the 80/20 or the payment with pmi. the good thing about pmi since 2007 they passed the law where pmi is tax deductable, but IMO go with the lowest rate and best product for your needs

Answer 7

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Answer 8

no. pmi is not tax deductiable but check with the irs.gov. i believe that part of it is tax deductible. if you can put more down, then put it.