What does 100% financing mean for a mortgage rate?

[Anonymous]

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@Anonymous wrote:

This is my specialty. I am mortgage banker in PA.

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We cross posted. I am actually in PA, but my broker is out of state.

[Anonymous]

Taking the add on the rate is another way of avoiding paying the MI premium, but that extra 20 or bucks a month goes no where, you cant even use the writeoff. For 125K loan with the same terms the payment would be about 45 per month difference. If you paid one time with that score the premium would be approx. 1875 one time and thats it. It reallly depends on your individual homeownership goals are. It would take approx. 40-45 mo's to break even on the premium. ANohter determination would be the loan amount and if buying down the rate, whether you want fixed rate or ARM. It is really different for everyone.

[Math_Rocks]

As mentioned earlier, I have little common sense so I am sure you are imparting great wisdom and I am just not getting it.

Are you saying that it is better to get a program where we pay a higher interest rate (fixed) but don't pay PMI? Also, what is your opinion about interest-only loans? For instance, Quicken has a fixed rate product where you can pay interest only for the first 10 years and there is no prepay penalty.

[MidnightVoice]

I opted for a premium program which included a higher rate of 6.75% but I do not have to pay PMI. The PMI was $105 a month and the higher interest only cost me $20 a month, so I am saving quite a bit.

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But PMI can be removed when you have enough equity in the house, and hence it does not last the length of the mortgage. 

I put down 10% with PMI, and got the PMI removed 5 years later, due mainly to increase in the value of the house.  So it was equivalent 25 years without PMI and 5 years with.  Huge savings

Message Edited by MidnightVoice on 05-18-2007 01:59 PM

[Anonymous]

Again, it really depends on how long you are planning on staying in the house. If you can afford a fully amortizing payment, I would take that route. Your payment will be about 100 less per month for first ten years but your rate will be higher. After the 10 years your payment will go up about 150 per month.

I would never suggest 100% I/O to anyone in a declining market. If you need to sell your home for any reason the next ten years you may wind up owing more than it is worth.

[Anonymous]

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@MidnightVoice wrote:

I opted for a premium program which included a higher rate of 6.75% but I do not have to pay PMI. The PMI was $105 a month and the higher interest only cost me $20 a month, so I am saving quite a bit.

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But PMI can be removed when you have enough equity in the house, and hence it does not last the length of the mortgage.

I put down 10% with PMI, and got the PMI removed 5 years later, due mainly to increase in the value of the house. So it was equivalent 25 years without PMI and 5 years with. Huge savings

Message Edited by MidnightVoice on 05-18-2007 01:59 PM

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I only put down 5% and we're not quite sure if we'll be here for more than 5 years, so it made sense for us to the higher rate. Hopefully in another five years the house will be worth much more and we can sell and get something bigger. At the moment a lower monthly payment is the important thing for us.

[Anonymous]

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@Anonymous wrote:

Taking the add on the rate is another way of avoiding paying the MI premium, but that extra 20 or bucks a month goes no where, you cant even use the writeoff.

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Can you please explain? That $20 a month is interest which I can write off. I cannot write off PMI.

[Anonymous]

As of this year you can write off your PMI!

[Anonymous]

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@Anonymous wrote:

As of this year you can write off your PMI!

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Thanks so much for the info! I got excited for a second. I ran off to google it as soon as I read your post and learned a couple things:

It's only for mortgages on houses purchased in 2007
It's only available for 12 months (ending Dec 31, 2007)
It's not available for households with adjusted income exceeding $110,000

Since I am buying in June 2007 I could only write off PMI for six months. That with the fact that our income exceeds the maximum means it doesn't make sense for me to do it.

[Anonymous]

I should have been more specific, but you right. The only thing is they are probaby going to continue to allow it indefinitely.