Real Estate and Home Mortgages - LPMI vs 80/15 loans: Which is a greater benefit for me and why?
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patchaneeoy
04-21-07, 08:03 AM
I'm shopping for a loan for a Condo.
condo: 346,000
down payment: 5%
There are two loans that I have to decide which one to go with ,but I'm not quite sure what is the best option for me in the long run. I'm planning to be in this house for at least 5 years.
1) LPMI: 30 years fixed @ 6.375 interest rate
2) 80/15 1st mortgage at 6.125 fixed for 30 years and 2nd mortgage at 8.05 fixed for 20 years
From one of the post on this forum. It says that 80/15 loan is better than LPMI. I would like to get some clarification on how it will benefit me, If I choose to go with 80/15 or LPMI?
Also, Am I paying too much for interest rate on this? I have about 2000 lefts for car payment and I have no other debt. My FICO score is 746.
condo: 346,000
down payment: 5%
There are two loans that I have to decide which one to go with ,but I'm not quite sure what is the best option for me in the long run. I'm planning to be in this house for at least 5 years.
1) LPMI: 30 years fixed @ 6.375 interest rate
2) 80/15 1st mortgage at 6.125 fixed for 30 years and 2nd mortgage at 8.05 fixed for 20 years
From one of the post on this forum. It says that 80/15 loan is better than LPMI. I would like to get some clarification on how it will benefit me, If I choose to go with 80/15 or LPMI?
Also, Am I paying too much for interest rate on this? I have about 2000 lefts for car payment and I have no other debt. My FICO score is 746.
Family Guy
04-23-07, 09:36 AM
That's a good rate for LPMI, if there are no origination fee or discount points. Make sure that you aren't being quoted a 95% loan with no points but an LPMI loan that DOES charge a point to make the rate gap look smaller.
You have to consider a few things to know which route is better, mainly, how long will you be in the house?
If planning to be in the house for the long haul, then the combination loan is the way to go. The payment is higher, since the 2nd loan is at a higher rate than the 1st, HOWEVER, you can pay that off eventually and then you only have the 1 loan left at a nice rate.
If only planning to stay in the house for a fairly short term, then maybe the LPMI is the way to go. The payment should be lower (especially with the rate you mention). Just know that the rate does NOT drop when you reach the 78/80% mark on your principle balance. PMI would have dropped off at that point lowering your note. A 2nd loan of an 80/15 will eventually be paid off. With LPMI, that's your rate for the life of the loan.
No single product is better than the other--including paying PMI. It all depends on the situation and borrower.
-Know your long term plan.
-Get figures for payments on both loans.
-Look at the big picture. Are you more interested in long term savings or monthly?
Answer those 3 questions and you'll know which route to take.
You have to consider a few things to know which route is better, mainly, how long will you be in the house?
If planning to be in the house for the long haul, then the combination loan is the way to go. The payment is higher, since the 2nd loan is at a higher rate than the 1st, HOWEVER, you can pay that off eventually and then you only have the 1 loan left at a nice rate.
If only planning to stay in the house for a fairly short term, then maybe the LPMI is the way to go. The payment should be lower (especially with the rate you mention). Just know that the rate does NOT drop when you reach the 78/80% mark on your principle balance. PMI would have dropped off at that point lowering your note. A 2nd loan of an 80/15 will eventually be paid off. With LPMI, that's your rate for the life of the loan.
No single product is better than the other--including paying PMI. It all depends on the situation and borrower.
-Know your long term plan.
-Get figures for payments on both loans.
-Look at the big picture. Are you more interested in long term savings or monthly?
Answer those 3 questions and you'll know which route to take.
patchaneeoy
05-03-07, 01:30 PM
Thanks family guy for you the answers. I felt great about the decision that I have made with you suggestion. I don't think i will be in this condo more than 5 years. So, I decided to go with LPMI. Eventually if the rate drop or my property value goes up. I might refinance and just take out only one loan. That should be ok right?
Family Guy
05-03-07, 03:27 PM
If planning to be there for about 5 years, then it should be an easy decision: go with the cheaper payment. As long as we're talking about fixed rates, not an ARM for your main loans, then you've got stability in case something changes in 5 years. Glad I could help.