lpmi/bpmi/upfront pmi?

10 years ago

My head is spinning with mortgage financing options. I am doing a conventional loan with 5% down, fixed rate 30yr.
BPMI= $133 4.5% rate $1384 mortgage.
BPMI = 4.875% rate $1316 mortgage
Upfront PMI: $4700, $1254 mortgage

I intend for this to be my last house, I don't plan to move again. How do I know which is the way to go??

Comments (3)

cricket5050
10 years ago
First of all, I got out of my PMI two years ago by refinancing under HARP. I would never do PMI again since the laws changed years ago and it is hard to get out of it. Not like 20+ years ago, when PMI dropped off after your loan value dropped below 80%. I don't know what BPMI is.

Is there anyway you can put more money down to eliminate the PMI? I realize this might not be an option for you.

This post was edited by cricket49 on Fri, Apr 4, 14 at 11:34
weedyacres
10 years ago
BPMI=buyer-paid PMI: traditional monthly payment until LTV is 80%

Upfront PMI=buyer pays PMI in a lump sum and has no monthly payments.

LPMI=lender-paid PMI: lender pays PMI in return for a higher interest rate

Which one is best depends on how long you plan to stay in the house. If it's a short period of time, the LPMI will typically be the lowest cost option, as the additional monthly interest is less than PMI would have been. The catch is that the interest rate is forever, so over the life of a 30-year loan, you will pay more in total with LPMI.

I whipped up a quick little spreadsheet, guestimated your loan amount at $248,000 to get close on the 3 monthly payments you noted above.

Since you expect to stay there forever, presumably the 30-year life of the loan, here's how they work out:

BPMI: You'll make $465K in total payments, including 100 payments of PMI

Upfront PMI: You'll make $452K in total payments, including the up front $4700.

LPMI: You'll make $472K in total payments.

So upfront PMI is best, if you've got the cash. Of course, if you've got the cash, 20% down would be even better, with a total payments (including the extra 15% down) of $420K.

And to toss out one more number:
100 PMI payments of $133 = $13,300. $4700 is obviously much less than that. But even if you consider the time value of money, you'd have to get a 30% return on your $4700 to support the cash flows required for the PMI.

So definitely pay PMI up front if you can (and if you don't have the 20% down). You'll be getting a 30% return on your money.
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TehyaJenZ6
Original Author
10 years ago
Wow thanks for such a detailed response! The loan is 199,500 which is 5% down and some seller concessions. Sadly I don't have 20% to put down so I'm doing PMI in one fashion or another no matter how you slice it.

I can pay the upfront PMI (for the first poster, you can get rid of it at 80% LTV, legally required for lender to do so at 78% of original loan value) but it will put me in a very tight situation since I may have to bring money to the table when my current home sells and I don't want to completely liquidate my savings.