Hello BP members!!!
Anyone know more about Single Pay Mortgage Insurance? I have read that you can pay all your PMI Upfront so you dont have to pay it monthly, thus making your total monthly mortgage payment smaller.
I am looking to buy a house to fix up and hold but dont have 20% down. Here in Los Angeles, 4 percent is around 12 grand depending on the price of the house. What I dont like is the PMI that is added each month. I reather add that to the mortgage and want to know if this is possible and how to go about it.
BP members, any ideas or has anyone done this before?
Hi @Julio Contreras ,
by "paying all your pmi upfront" do you mean you pay a year's worth of pmi or the entire pmi due for the duration of loan?
I meant by paying the entire PMI not just the year. Sorry for the confusion.
@Julio Contreras if you have the cash to pay the entire PMI, Why not use it instead to increase the size of your down payment, go the conventional route and thus avoid pmi altogether?
and the problem with that is if you sell or refi before the end of the loan term, then you have given them a sizeable chunk of money for nothing
how will the cash flow look with pmi?
If you google single payment PMI or lender-paid PMI, you'll get some info.
I am in process of doing this on a primary residence for myself. Two basic options for it, either pay it up front (I think it's about 2% of the loan value) or you can amortize it into the loan.
Benefits being no actual PMI to pay each month, but usually you'll pay a higher rate to start with or have a 2% higher mortgage to finance. There are situations when it makes sense, especially if you are going to hold the house for 3-5 yrs or so.
It becomes problematic if you think you'd increase the value of the home quickly (and thus get below 78-80% LTV quickly) or if you are gonna keep the house longtime.
I'm not an expert, but those are some things I've run across, hope it helps.
Sorry I haven't been too clear on my scenerio. This is going to be for a house that I will live on more than 5 years. Ideally a house that I will rise my family in. So it will not be a property to cash flow or use as an investment.
By upfront, I am meaning to put it on the mortgage, meaning amortize the PMI.
I have noticed that some traditional loans you can put down as low as 5%, some will allow for the PMI to be amortize. I am just wondering if anyone has done it.
for FHA it will not be ideal since PMI is on for the life of the loan, but traditional you are able to ask to be removed after equitiy is at 78%.
Correct me if I am wrong, I am no expert and seeking to see what BP think about this or if anyone has done this before.
@Jason Brouillard undefined
Thank you Jason,
We are most likely looking at the same websites when you search for single payment PMI or lender-paid PMI.
Did your lending give you any hassle on amortizing it?
Also, how much of a percentage down are you putting if you dont mind me asking?
I'm still in the process of getting the loan, but my mortgage broker doesn't see it as an issue.
If you pay the full PMI upfront, you'll never get that money "back" - so if you are going to rehab the house and do some force-appreciation that might get your LTV below 80% in 1-2 years - it probably makes sense to pay the PMI as a monthly payment, so it'll drop off and save you some money.
I am paying ~2% of my loan (~$3,500, i think) upfront/amortized into the loan to avoid the extra $133/month PMI payment. I don't see this house appreciating very fast and expect to be in it for 4-5 years most likely.
The main reason being that I'll keep $26,000 in cash that I can put toward my next investment property that I hope to get done later this year.
The other option I'm aware of is to not amortize the actual payment (the $3,500 in my case) and take a higher percentage rate - but that probably doesn't make sense if you are going to be in the house a long time.
Thank you for the information!!! I will do more research and talk to a lender to see what are the option. I just dont like the fact paying an extra payment each month but thats what it is when you put less than 20% down.
Thank you Jason!