Paying PMI upfront - is my math right?

[Anonymous]

I am putting 10% down on a $269,000 purchase. Loan is for $242,100. My loan officer has offered me two choices:

1. Monthly PMI at $76.67.

2. Lender paid PMI by paying a $3328 origination fee at closing. No monthly PMI payment.

The interest rate is the same for both options.

The amortization schedule shows it will take 79 months (about 6 1/2 years) for my LTV to drop below 80%. So with the monthly PMI, I'll pay a total of $76.67 * 79 = $6056.93.

I plan on staying in this property for a long time, and probably won't be making any extra payments initially. It seems to me that paying the PMI upfront is a no brainer. Am I missing anything?

Message Edited by ADay on 12-27-2009 06:54 PM

[Lel]

Your calculations seem to be correct.  Upfront PMI saves money in the long run.  It's analagous to paying points to get a lower interest rate, which also saves money over time.  Some borrowers, however, are unable to pay the extra fees in one fell swoop, so they have to go with the monthly PMI.

There's one thing about lender-paid PMI that has come up recently, which I hope will never, ever apply to you.  Some borrowers who have lender-paid PMI have reported that they are having trouble getting their lenders to consider loan modifications or other forms of mortgage relief.