PMI
Question: You do not necessarily have to pay PMI if you put less than 20% down. > We have an 80/15/5 (called a combination loan) loan on our townhome. > One loan at 80%, one loan at 15% and 5% down. Check with multiple > lenders as some lenders do not carry this type of loan.
> http://www.homebanc.com/LoanPrograms/Combination.as
p>Such loans weren’t available when I bought my place, so I know nothing about >them.
>Out of curiosity – what’s the interest rate on the 80% and on the 15%? What >would have been the rate if you had taken out one 95% loan? How much would >the PMI have been? Has there been enough appreciation on your place that >you could now cancel the PMI if you had it?
Answer: Here is a good example…
texas-loan.com/pmi.html {unfortunately I can’t create an HTML link to their site that works so copy and paste the link above into your browser…also the right column appears to be misaligned, but it conveys the point}
The 80% loan is at the same percentage as the 95% loan. The 2nd loan is at a higher rate, about 2-3 percentage points higher, but the interest paid on Ln2 is tax deductible, while PMI is not. I think your credit has to be better to qualify for this combo loan over a 95/5 loan with PMI, as both lenders have to assume additional risk in the absence of PMI. But for people who want to buy a house, have good credit, and a good income source…the combination loan is a better alternative.
Be careful. Some second loans on an 80-15-5 program have pre-payment penalties. But if you get a 2nd loan with no pre-payment penalties, you can attack that loan with extra payments towards principle and pay off the loan early (assuming that is the worst debt you have).
If the place appreciates effectively, we would be able to refinance or borrow against the appreciated amount (I don’t really know a lot about this area…we are 1 year into the loan). In order to cancel PMI, we would have to have 20% of the home paid off.
To answer your last question, I am not sure how much PMI would have been. I think there are several factors that go into MI, but an example would be ((mortgage amount) x .0078)/12 = monthly MI.
The .0078 would be the variable depending on what type of loans you had.
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