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Is there any benefit to PMI?

by johnnypham from Jacksonville, Florida. Jul 22nd 2013 Reply


Adrielle Edwards (AdrielleEdwards)
#902 ranked lender in California - 96 contributions

PMI is a benefit to the lender but in a round about way it is a benefit to you since you can make a smaller down payment by agreeing to pay PMI.

Jul 22nd 2013
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William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,728 contributions

PMI is an insurance product you pay for where the beneficiary is your lender. If you don't make the payments, and the lender has to foreclose, then PMI will pay the lender their loss (less deductible).. So the real benefit of paying PMI is the lenders.. however there is a benefit to you as well.. since PMI allows you to put less than the required 20% down payment.. but PMI is no longer deductible.. You can do an option called Lender paid PMI, where the lender raises the interest rate, and pay's the PMI for you.. the benefit here is you do get to deduct your interest, however since it's built into the interest rate, you would have to refinance to remove it if you get to the 20% equity mark.. .. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Jul 22nd 2013
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Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 4,468 contributions

Yes... without it, you would need 20% down for all loans.

Jul 22nd 2013
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Jason Vondrak (jvondrak)
#221 ranked lender in California - 1,741 contributions

PMI benefits the lender, not the borrower. It protects lenders if borrowers are to default on the loan.

Jul 22nd 2013
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Elden Lewis (elewis_409_299)
#41 ranked lender in Indiana - 223 contributions

As everyone here is saying the benefit is to the lender, however, it does allow you to use less than 20% as a down payment.

Jul 22nd 2013
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Linda Wintersteen (Linda123)
#62 ranked lender in Arizona - 1,256 contributions

The benefit is for the lender, in case you default, and you can take the tax benefit, since it is included in your mortgage payment... linda

Jul 22nd 2013
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John Beman (AmFirstLending)
#556 ranked lender in California - 38 contributions

The benefit for PMI is the reduced down payment requirements. It also benefits the lender by mitigating part of the risk for accepting a loan with less than 20% equity. The insurance doesn't cover the entire amount between the loan amount and the purchase price, but does reduce that exposure in the event of default. However, as stated by one of the other responders to your question incorrectly, PMI is no longer a tax deductible item, that law was changed as of January 2012. While its true that you can attempt to bury it in your interest deduction, if you were to be audited, those amounts would be excluded from the deduction. The alternative to PMI would be a concurrent second mortgage. The IRS allows the interest deduction on all mortgage loans (up to $1.0M), therefore you could deduct the interest on that loan without risk of a tax liability later. The overall payment would be less and you would have the tax benefits. Unfortunately, right now we don't offer our second mortgages in Florida, but hopefully soon! There might be a local institution that would offer the loan program for you. We could certainly do the first mortgage if someone else could provide the second mortgage. If I can be of further help, please don't hesitate to reach out. Thank you. John Beman john.beman@amflc.com 888-779-6500 x 7315

Jul 22nd 2013
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Mark Collins (ahfund)
#129 ranked lender in Florida - 13 contributions

The only real benefit to you is a lower down payment. Just to clarify, John is correct and PMI (also called MI) is no longer tax deductible. True, a second mortgage was used in the past to "piggy-back" unto an 80% first mortgage to avoid MI but this has become nearly extinct as a result of the housing bubble. To add another twist, many lenders now offer LPMI (lender paid MI) and this type of policy does offer tax benefits since the interest rate is increased to pay for the MI. Unfortunately, a lender will not reduce the rate even when PMI would typically go away. The real key in choosing one plan over another is having a clear idea as to how long you plan to stay in a home, how values are behaving snd if you plan to accelerate payments or refinance when property values become more attractive. Hope that helps!

Jul 22nd 2013
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Dave Metsker (DaveMetsker)
#36 ranked lender in Oregon - 2,318 contributions

PMI protects the lender, and allows you to have a lower down payment.

Jul 22nd 2013
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Michelle Curtis Loan Originator NMLS 401173 (MichelleCurtisLO)
#77 ranked lender in Florida - 2,245 contributions

The only benefit is you would be putting less than 20% down. PMI insures the lender so there is no benefit to you.

Jul 22nd 2013
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Chip Streater (TarheelChip)
#4 ranked lender in North Carolina - 6 contributions

YES: Home ownership for folks that desire down payments of less than 20%. PMI is still cheaper than transferring your future wealth to a landlord.

Jul 22nd 2013
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Pete Bass (PeteBass)
#30 ranked lender in Connecticut - 476 contributions

It allows you to have a loan to value above 80% - benefits the lender-

Jul 23rd 2013
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