Conventional loan with over 1% PMI - is this negotiable?

[on]

Got a rate lock for a conventional mortgage recently at 5.5% rate, 0 points, 5% down, and PMI 1.08%. Mid score used is 697.

In terms of absolute dollars, the PMI feels pretty high. However, the way I am looking at it right now is that it is a 'we really want this place' tax. From the online calculators I've used, it looks like that $ number is used until 78% or 80% LTV is hit. Is there no reduction of the $ over time? Second question, is it a negotiable piece? And just for my own sake, is there any way to spin PMI in a positive way? Are there tax write offs or anything available that makes this money not purely thrown away? Would another lender offer the same-ish rate with a lesser PMI?

[VALoanMaster]

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@on wrote:

Got a rate lock for a conventional mortgage recently at 5.5% rate, 0 points, 5% down, and PMI 1.08%. Mid score used is 697.

In terms of absolute dollars, the PMI feels pretty high. However, the way I am looking at it right now is that it is a 'we really want this place' tax. From the online calculators I've used, it looks like that $ number is used until 78% or 80% LTV is hit. Is there no reduction of the $ over time? Second question, is it a negotiable piece? And just for my own sake, is there any way to spin PMI in a positive way? Are there tax write offs or anything available that makes this money not purely thrown away? Would another lender offer the same-ish rate with a lesser PMI?

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Hi On,

Typically the PMI is not negotiable because the Private Mortgage Insurance companies set the rates they charge based on the risks.

With that being said, there are different options when it comes to how you pay the PMI. For example. You can do a split premium where you pay part of it upfront & that reduces the monthly. It's pretty much the same way FHA loans are done.

Yes, the PMI goes down as your principle balance goes down.

PMI is still tax deductible for folks with an AGI of 100K. From 100K to 109K AGI the deduction is reduced & for AGI over 109K the deduction is eliminated.

As far as there being a way to put a positive spin on PMI>

Here is my spin on it. PMI is a small price to pay to keep my money in my pocket. Think about. You're paying PMI because you're putting less than 20% down, right? That means less of your money is at risk. 

Here is another way to look at it. Let's say you're looking you to buy a $300,000 home. A 5% down payment would be $15,000 which puts your loan amount at $285,000. At 5.5% your principle & interest payment would be $1,618.20 with PMI of $187.63 ( I priced out the PMI at .79% not 1.08).

If you put 20% down, that would require an additional $45,000 so we need to look at how long it would take you to recoup that extra 45K based on the monthly savings. So here is the break down. Your total payment would go down by $443.14 per month. Now divide the increased cost ($45,000) by the monthly savings ($443.14) & you get a break even point of 101.5 months or 8.46 years!

So you can look at it like this. You're willing to pay $187.63 each month for PMI because it allows you to keep the extra 45K in your pocket, where you can get to it if you need to.

Does that make sense?