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Personal Finances / Buying or Selling a Home
|Subject: Re: Borrower vs. Lender paid PMI||Date: 4/16/2013 4:24 PM|
|Author: crackdclaw||Number: 125094 of 127777|
Can anyone tell me whether Borrow or Lender Paid PMI.....
Well, AJ just provided a fantastic analysis and I would agree with everything she outlined. You do know, this would have been a fair question to ask of the lender who provided the quotes. I suggest you ask your lender, see if they nail it as accurately as AJ. Also, I pulled up rates, and the difference I'm seeing is only a quarter point in rate for the two options. Not sure why your lender is showing a 5/8ths spread of 3.5 to 4.125 for the two options. While the loan amount drives that to some extent, it's rare to see that big a change in rate.
If I go with Borrow Paid PMI, I will pay $30 extra per month
If I go with Lender Paid PMI, I will pay $100 extra per month for the life of the loan.
The borrower paid MI comes to $640. + $70. or $710. The lender paid MI with the higher rate comes to $691. Add your extra payments and you are at $740. / $791. I understand, eventually the MI drops off, but your calculations for mailing in extra to reduce principal are off. AJ showed how much of each first payment goes toward interest. The balance of payment is applied to principal, and that figure is not a $70. a month difference. Quick calculation has me at about $25. a month.
I'm lost as to why you would add $30. to one option and $70 to the other option?
The borrower paid PMI loan will cost you less, starting with month 1, assuming you can afford the additional cost of the PMI in your cash flow initially.
AJ - you really rock. They way you evaluate info and outline answers is outstanding. I have a guess of your occupation but don't know for sure. You do certainly know the servicing side of the mortgage industry. Why don't you originate?
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