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Appreciation post: That moment I learned about PMI and how to dodge it
I was sitting in my car after a lender meeting last month and just stared at the paperwork. They told me I needed private mortgage insurance because my down payment was only 8%. That would have added about $120 a month to my payment for years. Then my buddy at work who bought a house two years ago mentioned something called "lender paid PMI" and said if I took a slightly higher rate, the lender covers the insurance instead. I ran the numbers and over 7 years with the higher rate I save about $2,800 total compared to paying PMI myself. Found this whole thing after I already had my offer accepted and nearly missed the window to switch. Has anyone else had a lender try to sell you on one version without mentioning the other?
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schmidt.iris5mo ago
Jumped in my own head reading this because I literally made the exact same mistake, like I was the one sitting in the car staring at paperwork (which is a weirdly specific scene, right?). I went with the standard PMI on my first house because my lender just said "this is what you pay" and I nodded like a dummy. Didn't find out about lender paid PMI until a year later when a buddy asked if I had "done the math on the break-even point" and I had to Google what break-even meant. You dodged a huge bullet by catching it in time, I'm still kicking myself for that extra chunk of cash I handed over every month.
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blairm775mo ago
$320 a month. That's what I was paying in standard PMI before I did the math and realized my lender paid option would have been $2,400 more upfront but saved me about $11,000 over five years. Just a heads up though, lender paid PMI isn't always the better deal. You usually get a higher interest rate to compensate, so if you plan on selling or refinancing within a few years, the standard PMI might actually be cheaper. I ran the numbers both ways and the break even point for me was around year four. Still kicking myself for not thinking about it sooner.
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noahwood5mo ago
Well I'll be damned. I used to think PMI was just one of those things you had to pay if you didn't have 20% down, like a tax for being a little short. Never even crossed my mind there was another way around it. Reading this made me realize how much money I probably left on the table when I bought my place a few years back. Makes me want to pull out my old paperwork just to see how bad I got soaked.
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