Is Private Mortgage Insurance a cash flow killer?

Question

Should I be preoccupied with avoiding deals where I risk having to pay PMI on the loan?

Josh Mitchell · Answer

@Chris Stromdahl yes the closer you are to 80% LTV the less PMI % you were pay. Your credit score is also another determinate banks use to put you in a category. Basically, they have a columns ex: 720+ credit score with 85-90% LTV = x% of PMI. So the better credit score, and lower LTV, the lower the PMI will be monthly for you. It will automatically drop off at 78%, but make sure you call bank when you reach 80% to request it be taken off!!! Hope this helps!

Chris Stromdahl · Answer

@Josh Mitchell

That was one the most informative/valuable posts I have read.

Thank you very much.

Josh Mitchell · Answer

@Chris Stromdahl glad I could help! Good luck!

Dave Meadows · Answer

@Chris Stromdahl

I have conventional financing, so it will fall off as I get to 20%. Im no finance guy, so I don't have the best answer to your question, but I think it depends on how much you put down and the type of loan. I think it also varies among lenders, and depends on the loan to value ratio as well. Im borrowing less percentage-wise LTV, and I'm pretty close to 20% down, therefore the PMI is very low.

Chris Stromdahl · Answer

@Dave Meadows

Thank you for the information.

So is the amount of PMI I pay inversely proportional to the % down payment I make?

I thought it was all or nothing, meaning, unless I make a 20%+ dp, I will have to pay  a full PMI.

Mark Whittlesey · Answer

Agree that PMI is just another cost. I have taken it many times and the deal still made sense.

PMI WILL drop off if the loan is conventional. All it takes is an appraisal.

But if you are getting an FHA loan then it will require a refi. Given today's hostorically low interest rates, that is something to keep in mind. You might have to choose between losing an absurdly low interest rate or keeping MI forever.

Dave Meadows · Answer

It depends on how much positive cash flow you expect and the cost of PMI. I'm putting 15% down on a current property, so I have to pay $16/month in PMI. If that's a cash-flow killer, I'm in trouble already. It's just going to make it a priority for me to get it paid down so the PMI will go away.

Bill Jacobsen · Answer

It is just another cost as I am concerned.  I add the ongoing cost to my interest rate.  I assume it will last forever.

Good Luck.

Bill

Is Private Mortgage Insurance a cash flow killer?

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