Advantages of PMI?

I've been reading all the recent posts on 80/10/10, 80/20 and 80/15/5 loans and the tax advantages seem clear. So, can you tell me what the PMI advantages are - why someone would choose that option over the others?

Message edited 5/26/2005 10:28:06 AM.

Re: Advantages of PMI?

I would imagine that if you are close to 20% but just can't scrape it together, PMI would be less money each month. Then you could refinance and get rid of it once you had some equity in the house.

Our PMI would have only been about $93 a month but we chose the 80/10/10 route (in our case, it was 80/12/8).

Re: Advantages of PMI?

If you get a great 30 year fixed rate and think it will be a loooong time or never for you to see those rates again, then you may want to pay the PMI for a couple of years.

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I am not sure of the advantages of PMI, but I do know that the 80/10/10 has gained more popularity recently. I hadn't heard of it before the last two years.

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Oh the one thing I did remember hearing is that if you elect the PMI option and then have your house appraised and it is 20% more you won't have to pay PMI any longer. I have heard that some houses can do that in a year. So that might be worth it.

Re: Advantages of PMI?

There aren't any real advantages to the lendee to have PMI. PMI is insurance that banks take you to protect themselves against your failure to pay the loan. So, basically, you are paying an insurance premium for the bank so the bank is insured to get their money back. It offers the homeowners ( lendee) no protection whatsoever. 80/10/10 mortgages are fairly new and I'm not all that familiar with them but for what I have read, it is basically 3 mortgages against the house. You have to be careful because the home equity portions, the 10/10, are usually variable and rate will increase as prime increases. The 80/10/10 mortgages have been created to help homeowners afford much bigger mortgages then they would have been able to afford with traditional mortgages.

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I thought i heard PMI was a minimum of 2 years before it was taken off?


We didn't do this though, so I could be totaly off, but worth asking your bank (maybe some banks do )

Message edited 5/26/2005 2:43:49 PM.

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also the lender has to take it off whne you reach 22% BUT you can call and have it canceled on your own at 20% (i guess this is just a way for them to make a little extra money UGH!!!)

but i think we are going the piggy back route to alleviate it...we are also looking at ARMS over 30 year fixed because we dont anticipate being in our place (when we even find one) forever...esp sinc ewe are looking at townhomes (that is all we can get as a starter home her in MD...well lets be real starter homes dont exist anymore....)

Re: Advantages of PMI?

just saw this topic on Suze Orman this weekend...


she said piggy backs are a waste of money. what you should do is get a single file mortgage, where you can combine the PMI total cost (1% of the mortgage) into the total mortgage. and then it is tax deductable.


the example she used:

500K mortgage
1% PMI 5K

total mortgage 505K at 6% over 30 years - adds $27/month


of course this is something that you have to look into with your specifics.


she also mentioned borrowing from your 401K, since its for a down payment, you have 30 years to pay that back too.