Get a loan with PMI or save the money?

8 Replies

Hello BPers

I am about to close on the deal.

Purchase price is $144000

Either I do 15% down and pay PMI, save the cash or 20% down and no PMI

Down payment difference is $7000 more for 5%

PMI will be around $67.

Mortgage with PMI = 910

Mortgage without PMI = 785

Rent potential is $1200-1300

What should I do?

Thank you.

If it was me I would do 5%, save the rest of the money to now have 15% of the 20% required to buy a pure rental :) But I am crazy and love leverage! 

Honestly it really depends on your comfort with leverage and long term goal :)

Also depends if you are going to have to do any remodeling or fixing the property. Cash is always king when it comes to immediate needs

Good luck with your deal @Gagan Johal  

Flavio

Could you do 20% to avoid PMI. Then get another loan on it shortly after?

Thanks guys! I'm leaning more towards playing 20% down. 

@Elizabeth Colegrove  I am pretty comfortable with doing 20%.

@Flavio Zanetti House does not need any repairs..it is fully rehabbed. 

@Kirk R.   That's what I'm leaning towards.

@Gagan Johal  

Than do what you are comfortable! This world is hard and crazy enough that you got to start off comfortable :)

@Elizabeth Colegrove 
I agree with you.
I saved my pennies and it was time i get started. Got my first deal done and now on to the next one.
I appreciate the feedback.

Treat is as an investment. If you were to pay $7k additional to get paid (same thing as saving) $67/month, you would net $804 ($67 x 12) per year. That is just over 11% rate of return on $7k. Pretty decent. Only time I wouldn't do that is if you need the cash or can use that $7k to get higher than a 11% rate of return on a different investment.

@Sebastian Gast  
Yup I went ahead and got the loan with NO PMI. I know I made the right decision.
PMIs will suck the money right out of your profits. 
Thanks for the comment.


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