What kind of mortgage?

Original post by myasmom

Aug 15, 2005 12:48 PM

Hi,
For those who recently purchased. What kind of mortgage and taxes do you pay if you put down less than 20%.

violet Posted: Aug 17, 2005 04:04 PM

Re: What kind of mortgage?

Actually I read an article on bankrate.com that says PMI is probably a better idea if you plan on staying in your house for a long time because having only one mortgage is ideal in that situation, and the PMI will eventually disappear. The house I'm looking to get I could see staying in for 15 years. PMI is pointless if you're not sure if you'll be staying in a house for not more than a few years.

DjPiLL Posted: Aug 17, 2005 04:16 PM

Re: What kind of mortgage?

Posted by violet

Actually I read an article on bankrate.com that says PMI is probably a better idea if you plan on staying in your house for a long time because having only one mortgage is ideal in that situation, and the PMI will eventually disappear. The house I'm looking to get I could see staying in for 15 years. PMI is pointless if you're not sure if you'll be staying in a house for not more than a few years.

Using my numbers above.. if you manage to get your PMI cancelled in say 2 years (which is possible... but not guaranteed) then you can look at this scenario below.

In the two years you paid worthless PMI... you would have overpaid a total of $3288 buks compared to the piggyback loan.

Now granted once u get rid of the PMI... you are right you have less of a monthly payment than the piggyback option (by $19 dollars a month with my numbers).

But here is the kicker. To make back that $3288 number and break even... it will then take you about 14 years to break even on the deal!

And thats 14 years to just BREAK even!

No offense... but your broker is misinforming you. He probably gets WAY more commission for selling you a loan with PMI since thats free money for the bank.

DjPiLL Posted: Aug 17, 2005 04:19 PM

Re: What kind of mortgage?

And you never know... it is possible my numbers may be wrong. I am doing this pretty quickly after all.

Anyone else is welcome to take my numbers and do the calculating yourself and post your results here.

But this is pretty simple stuff IMO.

violet Posted: Aug 17, 2005 05:04 PM

Re: What kind of mortgage?

Is it possible for an amount to come out less with PMI than a piggyback loan?

I am going to try to find a way to get 20% somehow because this PMI or piggyback loan increases my monthly payments either way. It's crap. I think we should go through our 401(k)s if we have to. A house is a great investment.

DjPiLL Posted: Aug 17, 2005 05:07 PM

Re: What kind of mortgage?

No, from all the experiences and examples I have seen, you will always pay way more when you are paying PMI.

laborday06 Posted: Aug 18, 2005 04:16 PM

Re: What kind of mortgage?

Posted by DjPiLL

No, from all the experiences and examples I have seen, you will always pay way more when you are paying PMI.

Can't you write off the PMI with your taxes

NPbride Posted: Aug 18, 2005 09:40 PM

Re: What kind of mortgage?

Posted by laborday06

Posted by DjPiLL

No, from all the experiences and examples I have seen, you will always pay way more when you are paying PMI.

Can't you write off the PMI with your taxes

Nope

cluelessbride Posted: Aug 20, 2005 03:12 PM

Re: What kind of mortgage?

We wound up doing a 30 year fixed at 5.65% with PMI. We put practically nothing down. The rates we were being quoted on an 80/20 were with the 80 part being closer to 6%. I don't know if we made a good choice or not but I was not comfortable with a fluctuating percentage and felt we got a good rate with the 5.65.

DjPiLL Posted: Aug 20, 2005 04:28 PM

Re: What kind of mortgage?

Damm... with practually nothing down.... i couldn't even begin to imagine what your PMI payment is a month.

Probably 150-$200 a month or so?

jandt2006 Posted: Aug 23, 2005 07:31 PM

Re: What kind of mortgage?

we got our mortgage commitment letter, and our second mortgage is a 5/1 is that better or worse than a 15 year fixed? Can you even do a 15 year fixed on a second mortgage? Also do rates always fluctuate on a second mortgage?

DjPiLL Posted: Aug 23, 2005 09:30 PM

Re: What kind of mortgage?

Posted by jandt2006

we got our mortgage commitment letter, and our second mortgage is a 5/1 is that better or worse than a 15 year fixed? Can you even do a 15 year fixed on a second mortgage? Also do rates always fluctuate on a second mortgage?

The rates will fluctuate whenever the prime rate changes I believe.

But keep one thing in mind... a lot of people are scared of the adjustrable rate getting out of hand. But if the adjustable rate is on the second... much smaller loan... even if rates SKYROCKET... your total monthly payment shouldn't go up too much.

You have to check with your lender on what terms they allow for the piggyback loan. But there are people on this site that got a fixed rate on it.

NPbride Posted: Aug 24, 2005 08:09 AM

Re: What kind of mortgage?

Posted by jandt2006

we got our mortgage commitment letter, and our second mortgage is a 5/1 is that better or worse than a 15 year fixed? Can you even do a 15 year fixed on a second mortgage? Also do rates always fluctuate on a second mortgage?

We did a 15 year fixed on our second mortgage.

jandt2006 Posted: Aug 24, 2005 08:56 AM

Re: What kind of mortgage?

ok now i am more confused

Danielle&Scott Posted: Aug 24, 2005 10:16 AM

Re: What kind of mortgage?

Posted by DjPiLL

Damm... with practually nothing down.... i couldn't even begin to imagine what your PMI payment is a month.

Probably 150-$200 a month or so?

If you do a piggy back loan, like she described above you avoid PMI. That is what my wife and i are doing too
Scott

Blu-ize Posted: Aug 24, 2005 11:04 AM

Re: What kind of mortgage?

We did an 80/10/10 when we bought our house. It was lower than PMI. Even if it wasn't, at least I would have the write off. With PMI, there is no write off.
We just closed on our refi yesterday and combined the loans and included some old debt. Now our payment is lower and I have no more credit card payments.

MCDO15 Posted: Aug 24, 2005 11:32 AM

Re: What kind of mortgage?

Posted by jandt2006

ok now i am more confused

what are you confused about?

violet Posted: Aug 24, 2005 12:32 PM

Re: What kind of mortgage?

There's many options I'm going through for mortgage. Like the first loan will be probably around 15%. The second loan 5%. Now this is what a broker suggested. Since the second loan is only around 20k, it would be better to do it as a line of credit and interest only for the first 10 years. The payments would be very, very low. BUT I can pay towards the principal as much as I want for the first 10 years. And everytime I pay towards the principal, the interest reflects off the new amount that's left for the principal, NOT the 20k I originally borrowed.

It's called a Heloc loan. I was told it's ideal for when the loan amount is pretty low. If it's not paid off after 10 years, then it's re-amortized for the next 10 years. It's a 20-year loan. If it's paid off within 10 years, it simply disappears.

Anyone have any experience with this kind of loan?

Blu-ize Posted: Aug 24, 2005 02:08 PM

Re: What kind of mortgage?

Posted by violet

There's many options I'm going through for mortgage. Like the first loan will be probably around 15%. The second loan 5%. Now this is what a broker suggested. Since the second loan is only around 20k, it would be better to do it as a line of credit and interest only for the first 10 years. The payments would be very, very low. BUT I can pay towards the principal as much as I want for the first 10 years. And everytime I pay towards the principal, the interest reflects off the new amount that's left for the principal, NOT the 20k I originally borrowed.

It's called a Heloc loan. I was told it's ideal for when the loan amount is pretty low. If it's not paid off after 10 years, then it's re-amortized for the next 10 years. It's a 20-year loan. If it's paid off within 10 years, it simply disappears.

Now I'm confused, two loans totalling 20% of the home value?
Anyone have any experience with this kind of loan?

violet Posted: Aug 24, 2005 04:00 PM

Re: What kind of mortgage?

Posted by Blu-ize

Posted by violet

There's many options I'm going through for mortgage. Like the first loan will be probably around 15%. The second loan 5%. Now this is what a broker suggested. Since the second loan is only around 20k, it would be better to do it as a line of credit and interest only for the first 10 years. The payments would be very, very low. BUT I can pay towards the principal as much as I want for the first 10 years. And everytime I pay towards the principal, the interest reflects off the new amount that's left for the principal, NOT the 20k I originally borrowed.

It's called a Heloc loan. I was told it's ideal for when the loan amount is pretty low. If it's not paid off after 10 years, then it's re-amortized for the next 10 years. It's a 20-year loan. If it's paid off within 10 years, it simply disappears.

Now I'm confused, two loans totalling 20% of the home value?
Anyone have any experience with this kind of loan?

I'm sorry, I explained that part wrong. I'm putting 15% down, so to avoid paying PMI, I would be taking that second loan for 5%.