Another interesting tidbit from Sue Baker-Dirickson (www.princetoncap.com/suebaker-dirickson) our in-house lender from Princeton Capital...Maybe taking a second mortgage and creating an 80-10-10 loan to avoid PMI isn't always the best idea.
Most borrowers know that PMI (Private Mortgage Insurance) has been required by lenders for loans with a down payment of 10% or less. This additional monthly payment was not tax deductible until recently, and was difficult to eliminate, although supposedly it could be dropped when the loan to value ratio reached 80%.
Now credit scoring has entered the picture. Rates on PMI are being adjusted to a borrower's credit. We heard about a recent case where a client's rate was 1.88%, a whopping $600 a month extra on a loan of approximately $400,000!
A 10% second mortgage (often from the same lender as the first, and at a higher interest rate) has been the way around PMI in the past, but now some lenders are offering another alternative. They are self-insuring, and giving 90% rates that are preferable to the blended rate of the 80-10-10...definitely something worth exploring!
Most borrowers know that PMI (Private Mortgage Insurance) has been required by lenders for loans with a down payment of 10% or less. This additional monthly payment was not tax deductible until recently, and was difficult to eliminate, although supposedly it could be dropped when the loan to value ratio reached 80%.
Now credit scoring has entered the picture. Rates on PMI are being adjusted to a borrower's credit. We heard about a recent case where a client's rate was 1.88%, a whopping $600 a month extra on a loan of approximately $400,000!
A 10% second mortgage (often from the same lender as the first, and at a higher interest rate) has been the way around PMI in the past, but now some lenders are offering another alternative. They are self-insuring, and giving 90% rates that are preferable to the blended rate of the 80-10-10...definitely something worth exploring!
No comments:
Post a Comment