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PMI is teh suck.

glh (14273) writes | more than 8 years ago

User Journal 2

So we're finally getting settled in our house, and the bills are rolling in! I had an interest only construction loan that is supposed to be converting to a conventional mortgage. This is fine and dandy, except for the sad fact that the bank only goes by the "appraised" value of the prints on the house back before it was even constructed. This just so happens to = the contract price of the house + the cost of the lot. They won't take it to consideration the 10,000 + additional we put in

So we're finally getting settled in our house, and the bills are rolling in! I had an interest only construction loan that is supposed to be converting to a conventional mortgage. This is fine and dandy, except for the sad fact that the bank only goes by the "appraised" value of the prints on the house back before it was even constructed. This just so happens to = the contract price of the house + the cost of the lot. They won't take it to consideration the 10,000 + additional we put in to stuff such as irrigation, landscape, lighting upgrades, etc. The down side is, since I don't have 20% equity based on the loan amount, I have to pay the dreaded PMI.

Or maybe not... Today I spoke with my mortgage broker (who got us the original loan) and we can get a slightly higher rate (5.75% instead of 5.625) but fixed for 30 years, and not have to pay PMI because we'd be taking out a 2nd mortgage for the amount we need to make up to have 80% equity on the first. The nice thing is, my payment goes down about $50 a month, and I am not throwing away any money on PMI! Based on a loan calculator, I'd be paying PMI on the current loan for about 8 years (unless the bank reappraised me for and gave me the necessary amount, which is probably somewhat likely if I did so in a year, but I doubt my PMI would go away, it would just reduce).

Anyway, I just thought I'd JE about it. I'm not 100% sure I'm going the re-finance amount yet, still have to review the numbers. Right now it seems like a better option-- unless I could somehow get my PMI removed on the other loan.

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2 comments

Closing Costs (1)

jfollas (634818) | more than 8 years ago | (#13428135)

I had thought about doing something similar to that, but the closing costs paid upfront (or financed into the loan) seemed to cancel out the PMI paid out over time. Let me know if you find a way around this!

Re:Closing Costs (1)

glh (14273) | more than 8 years ago | (#13428260)

That's really what I'm looking into now. Fortunately I'm going through the same title company so the costs are pretty low. After about a year my PMI is $1200. So, that would be $1200 that I instead will be using to pay off additional principle.

The tricky part of the equation is "when does my PMI go away under my current loan?". I've seen some loan calculators show you are paying full PMI until you get to the 80% mark, others that reduce PMI at the 85% mark. I can't get a straight answer from Huntington on that just yet. Also, I'd have to pay the $250 no matter what to get a re-appraisal. So I can go ahead and say closing costs - $250 for my comparison.

Right now my gut feeling is that I will probably need to live in my house for at least two years to make it worth while. If I live there for more than 15, it is definitely worth while because I'd have to refinance after 15 w/ the current loan (it is a 15/30) The real question is, what will my principle look like in about 10 years, which is probably when I'd plan on moving.

On an unrelated note- you ready to give that presentation?? Looking forward to it, and Kern might even show up. :) I'm sending out a reminder email today.
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