Posted by JohnBoy on October 24, 1998 at 04:32:23:
I would call the bank and tell them thanks but no thanks. I don’t wish to accept any of their insurance offers. The property is way below 80% LTV and there isn’t any need for this type of insurance. Is this Private Mortgage Insurance your talking about or insurance that would pay off the loan in the event something was to happen to you?
In one of your above posts you stated that you would refinance in a year and pull out the cash you used to put down on this ($12,000). In the above post here you said you would be putting 10% down on the $54k.
Posted by GREEKVESTOR on October 22, 1998 at 21:53:19:
Hello,
I will close on a property next week and the bank offered the following in leau of traditional mortgage insurance coverage:
They call it TAMI (TAX ADVANTAGE MORTGAGE INSURANCE)
With regular MI the money you pay are not tax deductible. With TAMI it is 100% tax deductible simply because the MI amount is added into the loan interest as a percentage.
(Guys, if interested, Countrywide Home Loans is doing this).
I’ve worked with 20 banks for a mortgage over the past 10 yrs. So far Country… is the best!!!
So, the interest rate is raised a bit, but you do not pay for any additional MI on your monthly P&I. Does everyone follow me?
TAMI saves money because, monthly dues are lower than the ones with traditional MI. Especially for people in the 30% tax bracket.
THIS IS NOT AN AD OR ANY SOLICITATION:
Anyone interested to invest in the Pocono area, PA, Buyer’s Resource of the Poconos Realty is the best I found in years. These guys are dedicated to you! great service!
Are you sure that the mortgage insurance the bank is selling is actually PMI? I suspect that they may be really selling you mortgage life insurance.
Mortgage life insurance is usually very expensive when compared to straight term insurance. Mortgage life insurance only pays off your loan balance in the event something catastrophic happens to you. The longer you own the property, the lower your principal balance becomes and consequently the lower the “death benefit” becomes. That extra premium added onto your monthly mortgage payment is another cash cow for the mortgage companies.
Contrast this to term insurance with a level benefit for the life of your loan. For the same initial face amount, I believe that you will find term insurance much cheaper in the long run than mortgage life insurance.
Posted by Bo (GA) on October 23, 1998 at 06:58:56:
With conventional PMI you can cancel it when the loan balance reaches (typically) 80% of the appraised value of the property, plus some other conditions such as being current on the payments, etc., depending on the lender. This can happen in just a couple of years in to the mortgage payments, especially if the property is in a hot market. How does that work with TAMI? Will the mortgage interest rate be adjusted? Just something to ponder.
Re: IT IS NOT MI/ IT 'S TAMI - Posted by Joe Kaiser
Posted by Joe Kaiser on October 23, 1998 at 24:47:42:
I just want to know . . . did they keep a straight face when they explained this all to you? A very slick marketing job with just one small problem . . . over the life of the loan I’ll wager you’d pay ten time what normal PMI might have been.
Re: IT IS NOT MI/ IT 'S TAMI - Posted by GREEKVESTOR
Posted by GREEKVESTOR on October 23, 1998 at 14:46:22:
Hi Joe,
I’m not planning to keep the same mortgage for the life of the loan [30 yrs.]. I’m buying for $54K, and the bank appraised the subject property for $95K “as is”. And believe me the house is a mess. Which means that with a little TLC the house will value over $100K. This is also shown by studying recent sales comps in the area. With all this, I’ll probably refi next year or whenever the rates will start plunging again, this way I’ll pull-out all the cash I’m putting down for the purchase [about $12,000].
But even if I were to keep the subject longer:
However Joe, I do not see how TAMI will end up costing me more than PMI in the long run. Do you know something I do not know about TAMI? It is very clear: PMI is added on the loan interest rate as additional rate. But still, when calculating monthly payments with TAMI vs. PMI, TAMI is lower, [and with a significant differential]!
Joe, if you know any pitfalls with TAMI please rwespond
Thanks!
Posted by JohnBoy on October 23, 1998 at 20:26:22:
I don’t understand this. The property appraised for $95k “as is” and your paying $54k putting $12k down. That leaves a loan balance of $44k on a $95k property. 44% LTV!. What do you need to pay for PMI or TAMI??? You should only need this if the first mortgage exceeds 80% LTV. What am I missing here?
Re: IT IS NOT MI/ IT 'S TAMI - Posted by GREEKVESTOR
Posted by GREEKVESTOR on October 24, 1998 at 02:27:07:
That’s right JohnBoy!
I’m buying at 54K with 10% down. The bank is the one who told me that the subject appraised at 95K. They are the ones who sent me the loan application with the choice of PMI or their so called TAMI!
You’re probably right with your quick analysis. I shouldn’t pay for mortgage insurance.
John, I’m a “first-grader”.
What do you suggest???