BRRRR - PMI Question

[Anan Smith]

When doing a BRRRR, it is my understanding that you're limited to pulling out up to 75% of the ARV. I am correct in thinking that when when refinancing, if I wrap the closing costs of the refinance into the loan, as long as it does not exceed 80% LTV I do not have to pay PMI?

[Chris Mason]

Originally posted by @Anan Smith:

@Chris Mason Do you mean mostly no one absorbs the closing costs into the loan on a refinance, but if it is done, it is absorbed into the interest rate, not the loan balance? I'm thinking about how to leave the least amount of cash in the deal. 

You can swap rate for fees/cost back and forth at a ratio of typically about 0.5% of your loan amount per 0.125% to rate.

So on a $500k loan if you want to wipe out $2500 in closing costs, bump the rate 0.125%. Everyone knows about discount points, the "hidden menu" is that they go the other direction too. That's all we're doing here. If you're only going to be in the mortgage for a year or three, you will come out ahead. If this is permanent "I'm never going to sell or refinance" financing, you will come out behind.