Pay Mortgage Insurance up front or factor into loan?

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Which option would you choose?

Assume home is worth $ 340k and you are refinancing for a 90% loan.
Would you pay $ 1439 (plus tax and home insurance) at interest rate of 3.875%. Closing costs would be about $ 21,000 which includes $ 4896 for Mortgage Insurance. Principle to pay off is $ 306,000k (90% of home only).
Would you pay $ 1550(plus tax and home insurance) at interest rate of 4.5%. Closing costs would be about $ 16,000. Principle payment here is higher since you are factoring the MI into the loan. Principle to pay off is $ 311,661 with the MI.

Also, you expect to stay in the home for the next 5 years. After that.. who knows.. first kid on the way too 🙂

I was laid-off from work within the last year and it is becoming increasingly difficult to make my mortgage payment each month. I contacted BoA, who holds my loan and they said there was nothing they could do without paying hefty closing costs to refinance, which mI currently do not have. I thought I was a prime candidate for refi with my current situation. Could someone please direct me to the correct government agency that is responsible for the housing stimulus. Thanks in advance.

  1. Reply
    January 22, 2011 at 5:52 pm

    finance it in as it is a tax deductible item these days

  2. Reply
    Paul in San Diego
    January 22, 2011 at 6:45 pm

    Mortgage insurance is tax deductible on a limited basis. It’s currently being extended as being tax deductible through 2010, assuming you bought the property in 2007 or later. But, this is only 100% deductible with a combined annual income of $ 100K. It then phases out as you make more money, until it’s no longer deductible if you make $ 110K.

    You would be able to deduct it as part of the principal if you financed it with the mortgage. But, you would pay more in interest charges on it over the lifetime of the loan, as well as having a higher loan balance to pay off when you sold the property.

    I would recommend rolling it in with the principal. You will have a marginally higher payment, but you’ll be able to write some of that off. And, the extra $ 5K or so in principal will probably be negligible when you go to sell. Plus it will be in inflated dollars.

  3. Reply
    Home loans by Cal
    January 22, 2011 at 7:28 pm

    Keep calling BofA, everyday if you have to. Always ask to speak only to the Home Retention Department, nobody else. They will give you answers that you do not want to hear, but keep calling, eventually you will get satisfactory results, but be careful about accepting their first offer, a lot of times you will get a better offer if you hold out, but that too is a gamble. DO NOT pay anyone to do a modification, for one, you will lose your money, and secondly, it is now against the law to pay upfront for a modification.

  4. Reply
    January 22, 2011 at 8:17 pm

    Your best bet is to modify your loan because being unemployed pretty much disqualifies you from refinancing. You can call a HUD counselor for free assistance – I don’t know what state you’re in but for California the number is (800) 569-4287 or check HUD online ( for your local number.

    You can also try and do this yourself but it’ll require patience and persistence. Check out BofA’s website and do your homework. There’s a number on their site you can call to start the process or call the customer service number on your monthly mortgage statement and ask for the loan modification/home retention department. Tell them your financial hardship and give them your current income (unemployment benefits?) and expenses. From that point, if they “pre-qualify” you for a loan mod, they’ll tell you what other documents you’ll need to send them. After that, it becomes a waiting game as loan mods tend to take at least 60 days, unless you’re fortunate enough to get the “right” people working on your file. Call them EVERY week or two to get a status check on the progress off your file and keep notes of who you talked to.

    Another option is to have a loan modification company do the work for you. Yes, they will charge you a fee but it can be worth it. Believe it or not, there are a few legitimate loan modification companies out there. One big caveat though, BE EXTREMELY CAREFUL with the company you select as there are many scams and fraudulent companies out there! Do your homework on the company you pick and ask them a lot of questions until your confident they are legit…if not, then you still have the other options stated above.

  5. Reply
    Janet P
    January 22, 2011 at 9:12 pm

    There isn’t a government office, if you qualify for any mortgage programs you apply via your lender.

    But if you are unemployed I can tell you that you will not qualify for any programs. You are not “a prime candidate” as no modification would do any good, you have no way to pay for your loan.

    Your best bet would be to sell and buy something that fits your current life style and income level.

  6. Reply
    January 22, 2011 at 9:56 pm

    Are you under water on your mortgage (owe more than the home is worth)?
    If so you can try to do a short sale, and you have to work very closely with the lender to do that, but it is better than having a foreclosure.
    If you have equity in your home, why not just sell it and rent something you can afford for a while?
    Other options, take in tenants, rent the whole house out.

  7. Reply
    January 22, 2011 at 10:05 pm

    You need to contact HUD or go to their website, they have tons of useful information. Hope this helps.

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