mortgage rates and PMI

[chiver78]

I just got off the phone with my mortgage broker. he said something that caught me off guard, and I questioned it. apparently, the rules regarding PMI have changed a little since the last time I bought a place. I was told that if I pay a slightly higher interest rate (along the idea of points) that I would not be required to pay PMI.

has anyone else seen this? I'm sitting here scratching my head right now.

[mrnewengland]

I have not seen this.  I also heard something that I have been meaning to research in regard to PMI.  Someone told me that starting this year PMI is deductible (same as interest).  Anyone heard of this?  

[HoneyBBQ]

I bought 1.5 years ago and haven't heard of that. Sounds scammy.
Or maybe something your broker him/herself has negotiated with the lenders.

Why are you going with a broker? The best thing I did was just call up two banks and pit them against each other.

[HoneyBBQ]

Nov 24, 2014 11:10:20 GMT -5 mrnewengland said:

I have not seen this.  I also heard something that I have been meaning to research in regard to PMI.  Someone told me that starting this year PMI is deductible (same as interest).  Anyone heard of this?  

Yes, it's to stimulate home buying. Has limitations, exclusions, etc.


www.bankrate.com/finance/taxes/deducting-private-mortgage-insurance.aspx

[ArchietheDragon]

Maybe it is their way of saying an 80/20 loan.

[Deleted]

What kind of a rate difference are we talking?  Even if it's legit, I don't think I'd prefer paying more over the life of the loan to insurance I can drop when I get 20% equity. 

[TheHaitian]

Nov 24, 2014 11:14:28 GMT -5 minnesotapaintlady said:

What kind of a rate difference are we talking?  Even if it's legit, I don't think I'd prefer paying more over the life of the loan to insurance I can drop when I get 20% equity. 

As for as FHA and USDA is concerned:

PMI is for the life of the loan also - that changed when I was house hunting.

It no longer drops off when you hit 20% equity unless you refinance.

[chiver78]

thanks for that link, honeybbq. I'm definitely taking that with me to the accountant's office when I get my taxes done next year. I don't think we've been deducting my PMI, and I refinanced in 2009, just missing the date to be eligible for a lot of the loan modification programs that were available the past couple years. totally going to double-check stuff on this.

as far as the details, he hasn't sent me anything yet on the programs he'd put me into. I am going with a broker for a number of reasons I'm not getting into here, but it's the same broker that did the refi last fall for the condo I just sold. he's familiar with my finances right now, since nothing's changed much since the refi except that the mortgage payment isn't in there anymore.

regarding FHA/USDA - I'm not going that route, so that's not a concern for me. my plan had been to get into the house first, then save up to throw a lump sum at the principal to bring it over 20% equity as soon as possible. I'm not sure which route I'll take as far as PMI goes, but I'll definitely post the details of this no PMI thing to this thread as soon as I get 'em.

[Deleted]

Nov 24, 2014 11:11:51 GMT -5 HoneyBBQ said:

Nov 24, 2014 11:10:20 GMT -5 mrnewengland said:

I have not seen this.  I also heard something that I have been meaning to research in regard to PMI.  Someone told me that starting this year PMI is deductible (same as interest).  Anyone heard of this?  

Yes, it's to stimulate home buying. Has limitations, exclusions, etc.


www.bankrate.com/finance/taxes/deducting-private-mortgage-insurance.aspx

I thought that expired after 2013. Did it get extended?

[HoneyBBQ]

Nov 24, 2014 11:25:02 GMT -5 @txsbbtc said:

Nov 24, 2014 11:11:51 GMT -5 HoneyBBQ said:

Yes, it's to stimulate home buying. Has limitations, exclusions, etc.


www.bankrate.com/finance/taxes/deducting-private-mortgage-insurance.aspx

I thought that expired after 2013. Did it get extended?

Oooh you are right.

"But it expired in 2014, and unless the Senate Finance Committee’s tax extenders package (EXPIRE Act of 2014) gains approval, homeowners won’t be able to deduct private mortgage insurance or any other mortgage insurance premiums paid this year (or next)."

Sorry! 

[Plain Old Petunia]

Nov 24, 2014 11:24:17 GMT -5 chiver78 said:

as far as the details, he hasn't sent me anything yet on the programs he'd put me into. I am going with a broker for a number of reasons I'm not getting into here, but it's the same broker that did the refi last fall for the condo I just sold. he's familiar with my finances right now, since nothing's changed much since the refi except that the mortgage payment isn't in there anymore.

Oh, I missed that! Congrats on selling, Chiver.    Did you move into a rental? What sort of home are you planning to buy?

[chiver78]

Nov 24, 2014 11:42:31 GMT -5 Plain Old Petunia said:

Nov 24, 2014 11:24:17 GMT -5 chiver78 said:

as far as the details, he hasn't sent me anything yet on the programs he'd put me into. I am going with a broker for a number of reasons I'm not getting into here, but it's the same broker that did the refi last fall for the condo I just sold. he's familiar with my finances right now, since nothing's changed much since the refi except that the mortgage payment isn't in there anymore.

Oh, I missed that! Congrats on selling, Chiver.    Did you move into a rental? What sort of home are you planning to buy?

thank you! it was a very long time overdue....

right now, I'm couch surfing. my sis and BIL have a 3BR farmhouse out near the Quabbin Reservoir, and refuse to take rent. it's a pretty hellacious commute, but the price was right.      I'm looking at small houses/cottages in and around Bourne, MA. Cape Cod, but still close enough to commute to work an hour away.

[shanendoah]

Haven't read the whole thread, but no, it's not scammy. And in fact, it's how my current mortgage is structured.

It is called "Lender Paid PMI". Basically, you pay a slightly higher APR on your loan, and the lender pays the PMI insurance.

The big negative, is that in order to get rid of your PMI, you HAVE to refinance. Back when I originally got my mortgage, and I had PMI, after paying PMI for 2 years, I got to have someone come out and do a new appraisal of my home. Based on that appraisal, I no longer had to pay PMI, but the rest of my loan stayed the same.
With my current mortgage, I had a couple of restrictions - like this house has to remain my primary home for two years, and I can't just have it re-appraised and have my interest rate dropped. If I want to get rid of my PMI, I do have to go through the hassle of refinancing.
In the end, I think it may actually make a little more money for the banks because you're essentially paying PMI for the entire life of your loan (if you don't actively do something) instead of having it automatically drop off once you hit the 80% mark.
However, it's also nice for borrowers in that the percentage increase (mine was like a quarter of a percent) isn't as much per month as PMI would be AND, as the interest on your mortgage, it's tax deductible. (Which I don't remember my PMI payments being, but I could be remembering that wrong.)

[dondub]

Shanendoah is correct and this has been around for many years. I'm retired as a Loan officer now so can't quote the differential in rate. If I recall it was about .25%-.375% depending on lender.

In most cases that made the payment less than if it had market rate with PMI and tax deductible interest on that additional rate as an added benefit.

As usual, depending on how long you own the house, this may or may not be the best route to take. Just remember how long it can take to get that 20% equity through principal payments or market conditions.

[Deleted]

I'd be curious whether the lender is actually paying for PMI, or just assuming the extra risk fo default that comes with higher loan-to-value ratios. Either way, they're taking on a bigger risk so it makes sense that the loan would carry a higher interest rate.  Not scammy at all. 

[chiver78]

interesting. thanks, shanendoah and dondub. will definitely do the math out to see how it's all going to work out.

[Plain Old Petunia]

Nov 24, 2014 13:29:01 GMT -5 chiver78 said:

Nov 24, 2014 11:42:31 GMT -5 Plain Old Petunia said:

Oh, I missed that! Congrats on selling, Chiver.    Did you move into a rental? What sort of home are you planning to buy?

thank you! it was a very long time overdue....

right now, I'm couch surfing. my sis and BIL have a 3BR farmhouse out near the Quabbin Reservoir, and refuse to take rent. it's a pretty hellacious commute, but the price was right.      I'm looking at small houses/cottages in and around Bourne, MA. Cape Cod, but still close enough to commute to work an hour away.

It must be such a relief to have sold the condo. Best wishes for finding the perfect house at the right price.

[DVM gone riding]

Its normal its called 'lender paid PMI' I have had it when I bought and when I re fied I prefer it. Especially since my house has yet to increase in value from purchase point.

[truthbound]

Just put down more than 20% and you don't have to worry about PMI. That is the minimum you should be putting down anyway.

[TheHaitian]

Nov 26, 2014 5:35:22 GMT -5 truthbound said:

Just put down more than 20% and you don't have to worry about PMI. That is the minimum you should be putting down anyway.

Not in our HCOLA...

[chiver78]

Nov 26, 2014 5:35:22 GMT -5 truthbound said:

Just put down more than 20% and you don't have to worry about PMI. That is the minimum you should be putting down anyway.

thanks for your unsolicited advice.

[Deleted]

Nov 26, 2014 6:39:28 GMT -5 TheHaitian said:

Not in our HCOLA...

Yeah, Been There, Done That. I bought my first house in NJ with a friend and it was a real struggle to come up with a measly 5% down. We had the income to carry the mortgage but he wasn't much of a saver. We ended up with a mortgage with PMI.

[shanendoah]

The fact that housing costs have risen to the point that 20% down is a ridiculous sum in many areas is exactly why PMI programs are changing into lender paid PMI, etc.

[Deleted]

Nov 26, 2014 6:39:28 GMT -5 TheHaitian said:

Nov 26, 2014 5:35:22 GMT -5 truthbound said:

Just put down more than 20% and you don't have to worry about PMI. That is the minimum you should be putting down anyway.

Not in our HCOLA...

Eh. We that's what we did. We put down $100,000 when we bought our condo from hell 9 years ago (we live in Massachusetts so don't ask) and about that much when we bought the house last year (proceeds from the condo sale). No way in hell was I paying PMI. I pay enough in frickin' taxes around here. Then we have an escrow shortage every single year. EVERY. SINGLE. YEAR.

I will admit, for us, it worked out that my dad died and we used my half of the money from selling his (my!) house in the lovely city of Lynn to make the down payment. Life insurance was also helpful. I don't know what the hell he was thinking but he had me and my sister covered all over the place. Jeez.

Feel free to ignore this Chiver. This is just how our situation went. I never heard of the scenario that your broker gave you and we bought this place last year. I don't think she bothered to raise it since we told her right off the bat how much we were putting down as we knew DH would probably be retiring soon, just not as soon as he did! We prefer a smaller mortgage as we have handy people in the family so the need for extra money for home stuff was a crucial necessity.

[Deleted]

Nov 26, 2014 9:34:22 GMT -5 chiver78 said:

Nov 26, 2014 5:35:22 GMT -5 truthbound said:

Just put down more than 20% and you don't have to worry about PMI. That is the minimum you should be putting down anyway.

thanks for your unsolicited advice.

Sorry.

[phil5185]

We put down $100,000 when we bought our condo from hell 9 years ago (we live in Massachusetts so don't ask) and about that much when we bought the house last year (proceeds from the condo sale). No way in hell was I paying PMI.

lol - I'll pay PMI all day day long to retain the use of an extra $100,000 at 4% or 5% for 30 yrs (w/ a goal of turning it into $2.2M).
I've encountered 3 versions of PMI - pay monthly until you hit 20% equity, pay PMI for the length of the loan at a much lower rate, and prepay the PMI as a lump sum at the front end. I'll do #1 and #2, but not #3. (My goal is to retain capital for my own use).

[TheHaitian]

Nov 26, 2014 18:57:00 GMT -5 @empressspunkles said:

Nov 26, 2014 6:39:28 GMT -5 TheHaitian said:

Not in our HCOLA...

Eh. We that's what we did. We put down $100,000 when we bought our condo from hell 9 years ago (we live in Massachusetts so don't ask) and about that much when we bought the house last year (proceeds from the condo sale). No way in hell was I paying PMI. I pay enough in frickin' taxes around here. Then we have an escrow shortage every single year. EVERY. SINGLE. YEAR.

I will admit, for us, it worked out that my dad died and we used my half of the money from selling his (my!) house in the lovely city of Lynn to make the down payment. Life insurance was also helpful. I don't know what the hell he was thinking but he had me and my sister covered all over the place. Jeez.

Feel free to ignore this Chiver. This is just how our situation went. I never heard of the scenario that your broker gave you and we bought this place last year. I don't think she bothered to raise it since we told her right off the bat how much we were putting down as we knew DH would probably be retiring soon, just not as soon as he did! We prefer a smaller mortgage as we have handy people in the family so the need for extra money for home stuff was a crucial necessity.

And you admit within your first couple of sentences that the money came from selling your father's house and also inheritance. This way you were able to raise $100,000 to put down.

I think Chiver and I are within 5 years of each other, give and take. How many people do you know within the ages of 29 and 35, working normal jobs (not the outliers) regular salaries have that kind of cash seating around to buy a house?

At 29 my wife and I had 30k, we would have needed 60k to buy the basic model of our house without any upgrades and came to ~320k after it was all said and done.

When we started looking because my wife works in boston we looked in chiver's old Neighborhood, Southborough, Natick, Framingham in a effort to shorten her commute.

You are talking 400-450k for basic 3 bedrooms, 2 bath, 1,400 sqft ranch or Slab ranch homes ... That need some TLC.

How many entry level buyers in my age group (25-35) because that is the demographic those houses are targeting have 20% seating around unless :
- work extremely high paying job (would not be looking at entry level homes)
- had some help from family (gifts)
- inherited some money.

To get our house that did not need any work and still is considered entry level (on the nicer end) we had to look 2 towns outside of our preferred area with the hopes that eventually she will transfer to UMASS Worcester.

So came down to the choices that many in MA or any HCOLA make and we picked 1
- nicer home longer commute
- not so nice house or condo, short commute.

Anyway back to my point, yes you did it... But you had an inheritance; not the same situation at all for the rest of the population at large.

[Deleted]

Nov 26, 2014 19:34:01 GMT -5 TheHaitian said:

Nov 26, 2014 18:57:00 GMT -5 @empressspunkles said:

Eh. We that's what we did. We put down $100,000 when we bought our condo from hell 9 years ago (we live in Massachusetts so don't ask) and about that much when we bought the house last year (proceeds from the condo sale). No way in hell was I paying PMI. I pay enough in frickin' taxes around here. Then we have an escrow shortage every single year. EVERY. SINGLE. YEAR.

I will admit, for us, it worked out that my dad died and we used my half of the money from selling his (my!) house in the lovely city of Lynn to make the down payment. Life insurance was also helpful. I don't know what the hell he was thinking but he had me and my sister covered all over the place. Jeez.

Feel free to ignore this Chiver. This is just how our situation went. I never heard of the scenario that your broker gave you and we bought this place last year. I don't think she bothered to raise it since we told her right off the bat how much we were putting down as we knew DH would probably be retiring soon, just not as soon as he did! We prefer a smaller mortgage as we have handy people in the family so the need for extra money for home stuff was a crucial necessity.

And you admit within your first couple of sentences that the money came from selling your father's house and also inheritance. This way you were able to raise $100,000 to put down.

I think Chiver and I are within 5 years of each other, give and take. How many people do you know within the ages of 29 and 35, working normal jobs (not the outliers) regular salaries have that kind of cash seating around to buy a house?

At 29 my wife and I had 30k, we would have needed 60k to buy the basic model of our house without any upgrades and came to ~320k after it was all said and done.

When we started looking because my wife works in boston we looked in chiver's old Neighborhood, Southborough, Natick, Framingham in a effort to shorten her commute.

You are talking 400-450k for basic 3 bedrooms, 2 bath, 1,400 sqft ranch or Slab ranch homes ... That need some TLC.

How many entry level buyers in my age group (25-35) because that is the demographic those houses are targeting have 20% seating around unless :
- work extremely high paying job (would not be looking at entry level homes)
- had some help from family (gifts)
- inherited some money.

To get our house that did not need any work and still is considered entry level (on the nicer end) we had to look 2 towns outside of our preferred area with the hopes that eventually she will transfer to UMASS Worcester.

So came down to the choices that many in MA or any HCOLA make and we picked 1
- nicer home longer commute
- not so nice house or condo, short commute.

Anyway back to my point, yes you did it... But you had an inheritance; not the same situation at all for the rest of the population at large.

DH and I were both raised in this shithole state and are well aware of how expensive it is to live here so we would have made sure to have over 20%, inheritance or no. I hate this state to begin with but until DH dies, I ain't getting out. We would have saved the money, or used our wedding gift money, from 11 years ago. It just happened to be convenient for us that my dad died almost exactly 6 months after we got married, November 22, 2003 in case you were wondering to use the money almost 2 years later, towards the down payment so we wouldn't have PMI regardless. I have lived here for over 30 years. I would MUCH rather have my daddy than the money.

[Deleted]

Nov 26, 2014 20:05:38 GMT -5 @empressspunkles said:

Nov 26, 2014 19:34:01 GMT -5 TheHaitian said:

And you admit within your first couple of sentences that the money came from selling your father's house and also inheritance. This way you were able to raise $100,000 to put down.

I think Chiver and I are within 5 years of each other, give and take. How many people do you know within the ages of 29 and 35, working normal jobs (not the outliers) regular salaries have that kind of cash seating around to buy a house?

At 29 my wife and I had 30k, we would have needed 60k to buy the basic model of our house without any upgrades and came to ~320k after it was all said and done.

When we started looking because my wife works in boston we looked in chiver's old Neighborhood, Southborough, Natick, Framingham in a effort to shorten her commute.

You are talking 400-450k for basic 3 bedrooms, 2 bath, 1,400 sqft ranch or Slab ranch homes ... That need some TLC.

How many entry level buyers in my age group (25-35) because that is the demographic those houses are targeting have 20% seating around unless :
- work extremely high paying job (would not be looking at entry level homes)
- had some help from family (gifts)
- inherited some money.

To get our house that did not need any work and still is considered entry level (on the nicer end) we had to look 2 towns outside of our preferred area with the hopes that eventually she will transfer to UMASS Worcester.

So came down to the choices that many in MA or any HCOLA make and we picked 1
- nicer home longer commute
- not so nice house or condo, short commute.

Anyway back to my point, yes you did it... But you had an inheritance; not the same situation at all for the rest of the population at large.

DH and I were both raised in this shithole state and are well aware of how expensive it is to live here so we would have made sure to have over 20%, inheritance or no. I hate this state to begin with but until DH dies, I ain't getting out. We would have saved the money, or used our wedding gift money, from 11 years ago. It just happened to be convenient for us that my dad died almost exactly 6 months after we got married, November 22, 2003 in case you were wondering to use the money almost 2 years later, towards the down payment so we wouldn't have PMI regardless. I have lived here for over 30 years. I would MUCH rather have my daddy than the money.

so without an inheritance how would you have saved $100k by age 30?

[Deleted]

Probably the same way I saved it as I was over 30 when my father died. Put the money in the bank. We both already had hefty balances in our savings accounts as we lived at home until 8 months before our wedding. I was 30 when I married and he was 36. I wasn't as much of a drunk then. That didn't happen until after my dad died as that's what drove me over the edge. Student loans are paid off since I banked excess loan money instead of spending it on spring break trips or other stupid crap, and we had no debt. I know, we are the antithesis of YM stupidity but why spend the money if we don't have it? Our rent at the time was cheap and we were both working at the time we got married so even if my dad hadn't died we would have been able to swing more than 20%.

Turns out, having to pay off my dad's HELOC was a humongous eye-opener and I no longer spend money if I don't have to. I had my sister to share the expenses with but since I was the executrix, legally, it all fell on my ass. He knew I was the only one that would follow his wishes and I did. The fct that DH is now disabled and can no longer work makes me even more against spending money. Hell, I hate grocery shopping!