Which re-financing option is better – 95% financing with PMI or 1st and 2nd mortgage without PMI?

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The house has a balance of $ 125K and is appraised at $ 155K. I’d like to payoff my credit card debt, which is approximately $ 14K. When I refinance, should I ask for a loan of $ 139K (125K+14K) and be required to pay PMI or should I ask for 2 loans? One of the loans will be 80% of the total and the other loan would be the remaining 20% of the total. By choosing this option, I understand that I won’t have to pay PMI. What’s the best way to do this? The only downsides I can see is that I would be making 2 payments instead of one and that the total of the 2 payments will be higher than the current mortgage payment. Are there any other negatives I should know about?
My credit score is 720. I’m not certain of the interest rates yet, but when we initially spoke the lender said they could get me a 6.75% rate.

2 Comments
  1. Reply
    Carolinahomerates.com
    May 14, 2011 at 1:26 am

    this depends on your credit score…if less than 620…the PMI can be VERY HIGH.
    also depends on the rates….rates may be different on each product.
    You will need to look at the monthly mortgage payment……this will determine which one you should pick.

  2. Reply
    Dr. Deth
    May 14, 2011 at 2:21 am

    the 20% mtg will be at a lot higher rate than the primary mtg – a couple of percent higher at least – you have to see which way you wind up paying more on – but also – the PMI isn’t deductible like the extra interest would be so a lot of analysis is needed

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