The point here is to get the signature loan AFTER you get the home loan. That's why you go zero down and then pay off the loan principle versus the the principle and interest.

If you do the math, you end up paying $208,000 in interest on a $200,000 loan. That means for a $200,000 house you'll end up paying $408,000.

 

fwiw, the PMI you can write off on taxes iirc.

 

You should be able to write it off along with your mortgage for 20 years I believe. It is all rolled into the same payment, so you just write off the total amount.

 

I'm with 96 12v, but possibly for other reasons. (Please read the whole post)
PMI to me is a waste of money, interest rates in any form of loan are as I will illustrate below. In a lifetime you only make a certain amount of money so why not spend as little as possible? Interest is the only thing tax deductible wether it is PMI or conventional. The first year you can write off nearly 96% of your payments that year because the amortized interest is that large of a percentage in the first year, as you go on you pay more to the principal and have less interest to write off.

I am buying a house at the end of november with 20% down because it costs me less in the long run and I have the ability to do so. I also plan on making a yearly payment of $5k toward the principle which will knock 11 years of payments off my 30 year mortgage. Netting a savings of $103k over a regular 30 year mortgage. I pay $438k instead of $541k for a $280k loan @ 5%.

I can take that $103k that I didn't have to spend and build a wicked truck, vacations, retirement plan, anything I want! (Not right now but down the road... looooong term)

Think long term because a house is an investment but honestly a PMI payment is better than throwing your money out the window renting. I have a friend with a PMI loan and it was the best move for him because he can now write off home loan interest and he isnt throwing money away renting, not to mention he was able to take advantage of the hurting housing market like myself. Loans are very situational and that should be kept in mind.

 

G2,

Are you able to pay Bi-weekly as well? This would also knock off a nice chunk of years from your mortgage as well. on a 30 year loan it drops 7 years, with you already taking off 11 years it might only come out to 3.5 but hey thats alot of money still!

 

No the bank I am going through does not do a bi-weekly payment but 5% with no points is the best rate I can find around here. I could go to 4.75% with 1 point but it depends on exactly how much money I have at closing time, the $2800 would be nice to have in the buffer money pile but I know I will be in the house for a long while. It takes like $40 off each months payment and breaks even around 6 years and I'm back to the spend as little money as possible with a dont have too little buffer money stipulation there are exceptions for everything.

 

The bank doesn't have a choice of taking bi-weekly.....they have to take your payment if you send it in.......you can designate it as all principle and pay your house off more quickly.

 

On a $280k loan at 5.5% with zero down, the monthly payment is $1590 a month not including other fees, taxes, and insurnance.

The same loan with 20% down ($56,000) is $1272 a month. That's a difference of $319 a month.

If you got the signature loan and kept your $56,000. You could double your money in under 2 years investing in something like foreign currency exchange, or just pay off the loan in under 10 years.


Kris

 

Annabelle, the mortgage contract says I will not be entitled to a refund of part of the finance charge. The interest is paid in arrears so Novembers interest is paid in December and if I made a bi-weekly payment I will not be refunded the interest amount for the second half of the month.

HMX-1, I am buying a $350k house with 20% ($70k) down, the actual loan is $280k. Closing costs are sunk costs, nothing changes them. You are right, the $70k would be better in something that would double in 2 years but you could also lose 50% in 2 years and with the importance of the money to me and volatility of the market, i'd rather stick with safe rather than speculative. If it were possible to guarunteed double your money in 2 years, I would throw my life savings in it. I dont have expendable cashflow to invest in a speculative market at this time.

 

If that is the case then you could just save a little extra each month and make a double payment at the end of the year. You should have a set amount of interest for the months bill right? After that you could apply the second payment and it would achieve the same thing by adding one extra payment per year.

 

Im going with $5k a year toward the principle to take 11 years off my loan. Saves me $103k in interest and gets the burden of a house payment off my shoulders in 19 years.

 

I bought my first house in may. I put 20% down. I could have went with the FHA at 3.5% but was told its less trouble in the end to go convetional if you have the means to. My buddy just bought a house a few days ago and he went FHA. we both have the same rates except he has a PMI and ofcourse owes more on his house. The FHA process seemed to go easy for him. I guess you have to ask yourself do you want more liquid money or more money in the house and a smaller payment.