We are no cost refinancing (rate and term) our mortgage that we took out back in July with a 90% LTV. Our intent was to sell our old house after we moved to the new one and then put enough of the proceeds into the refi to get to 80% LTV and get rid of PMI.
What would you do if your PMI was $55/month ($660 annually) and you had to put another $24,790 down to eliminate it? Does that seem worthwhile vs. investing the $24,790? We will pay around $3,700 in PMI total before we got to 80% LTV in about 6.5 years.
Interestingly enough, if we put the additional 10% into the refinance directly, we will have to take a higher interest rate or pay some closing costs due to the lower amount borrowed reducing the rebate. So if we do put the additional money into the loan, we will do it after we close as an additional principal payment.
So, I see three options at this point. 1) get to 80% LTV with lump payment shortly after close and eliminate PMI immediately, 2) make $100-$200/month additional payments to shorten the time it takes to get to 80%, but still pay about $1,700 over the years, or 3) do nothing and pay PMI for 6 years or so