About to buy a house

chaas4747 · #1 07-27-2005, 03:30 PM

You must owe 20% less than the appraised value of your home to avoid PMI insurance.

James Boston · #2 07-27-2005, 03:37 PM

So if your current home appraises for $100K, you can borrow $80K, or do I have it backwards?

Patrick del Poker Grande · #3 07-27-2005, 03:41 PM

[ QUOTE ]
So if your current home appraises for $100K, you can borrow $80K, or do I have it backwards?

[/ QUOTE ]
Right. Without getting into other crazy things, you can borrow up to $80k before you have to pay PMI.

ThisHo · #4 07-27-2005, 03:43 PM

[ QUOTE ]
So if your current home appraises for $100K, you can borrow $80K, or do I have it backwards?

[/ QUOTE ]

in San Diego you can get exactly NOTHING for $100k. I hope these are made up numbers just for example purposes.

There are a LOT of ways to avoid PMI. We did a "piggy back" where we put 10% down, got a "2nd" mort for 10% at a higher interest rate and then 80% on the standard. Of course, we refid 3mo after moving in and our home appraised for 50% more than what we paid for it (to clarify - we locked in the price 7mo before moving in because it was a new build, but in 10mo the value was 1.5x what we paid for it)... such is the SD housing market.

Cased Heel · #5 07-27-2005, 03:59 PM

seems like you need to find out if borrowing the other 20% at a higher interest rate is better or worse than paying the PMI.

I wouldn't be surprised if it was worse.

chaas4747 · #6 07-27-2005, 04:02 PM

Always worse. The PMI is not tax deductible. Also you are paying for insurance you will never use on your house unless you default. The 80/20 you are actually paying down the price of your home, at a higher interest rate that is tax deductible. You are still applying payments to 20% of the equity in you home in the second scenario.