Author Topic: Moving up with smaller down payment  (Read 594 times)

mustachioso

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Moving up with smaller down payment
« on: March 15, 2017, 12:02:52 PM »
This probably puts me on the hedonic treadmill but I was hoping someone could poke holes in this plan before I move forward.

So question: If you have the opportunity to do 10% down payment instead of 20% AND there is no PMI (I get a deal through work at sofi.com) and you invest the rest at 7%, that's a smart move right?


Current situation:
I put 20% down on a 580k house (116k down) that has appreciated ~100k since  I bought it.
Unfortunately, I'm feeling the limits of 1,000sq/ft with 2 renters and 2 dogs living with me

Possible next situation:
Buy ~850k house to get an extra 600sq/ft in a nicer part of town
Put 10% down instead on it and invest the 100k appreciation (rough numbers I know after realtor fees etc)

The idea of going from 3k/mo to 5k/mo seems harsh but rents would go up to help pay for it and the investment income will offset ~7k per year as well as the tax returns from paying so much mortgage interest (I'm at the 28% bracket)

Thoughts?

Cwadda

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Re: Moving up with smaller down payment
« Reply #1 on: March 15, 2017, 03:04:00 PM »
Does the PMI go away at 20-22% equity? Or do you have to refinance?

mustachioso

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Re: Moving up with smaller down payment
« Reply #2 on: March 15, 2017, 03:32:03 PM »
They offer a 10% down without ever paying PMI at all

SwordGuy

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Re: Moving up with smaller down payment
« Reply #3 on: March 15, 2017, 04:45:44 PM »
How much will it hurt if you can't get renters at the price you want for 6 months?

Cwadda

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Re: Moving up with smaller down payment
« Reply #4 on: March 16, 2017, 08:14:05 AM »
They offer a 10% down without ever paying PMI at all

That's a great deal. You can always take that extra 10% cash and put a lump payment down on the loan at any point in time.

thenextguy

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Re: Moving up with smaller down payment
« Reply #5 on: March 16, 2017, 04:03:26 PM »
They offer a 10% down without ever paying PMI at all

Is the interest rate higher? Make sure there aren't other fees to make up for lack of PMI.

Capt j-rod

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Re: Moving up with smaller down payment
« Reply #6 on: March 17, 2017, 05:41:01 PM »
My ultimate goal in all real estate is to own it outright. That is a huge payment. I'd imagine you are in a crazy high priced housing market. It comes down to your finances outside of the housing purchase. Can you swing the payment with no renters? Do you have 6mos-1 year cash reserves? If so that makes it more feasible. The bank will always make its money. Is there enough meat on the bone to make it worth your risk? I always recommend having a substantial amount of positive equity in a property. Run a personal net worth calculation. It will help to guide you.

SBuck

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Re: Moving up with smaller down payment
« Reply #7 on: March 23, 2017, 11:58:09 AM »
They offer a 10% down without ever paying PMI at all

Smells like LPMI to me, read the fine print. Instead of the typical BPMI where you are paying the MI on a monthly basis until 20% of your principle is paid off, you are paying the MI through the higher interest rate. One thing to keep in mind with LPMI the way to get rid of it is through a refi as the MI is built into the rate for the life of the loan. If the goal is to put less money down, have a lower monthly payment ask your lender to show you both BPMI (will have a lower interest rate) and LPMI options and weigh the options as well as the payments from there.

Just for reference- LPMI is Lender Paid Mortgage Insurance and BPMI is Borrower Paid Mortgage Insurance.