Thanks for the replies to my last post. I thought I would post a
follow up with more info. To sum up, I am trying to decide if a
80/15/5 loan makes sense for a $339,000 loan. I will be moving in 3
years, and so am going with a 3-1 ARM.

I am military and am moving to the Hanscom AFB area in MA. Renting is
out of the question - I am also a musician and need to modify the
basement to accomodate a recording studio. If the housing costs really
do plummet, then I will seriously consider taking a second assignment
there, or switching to civilian. Also, I am plain sick of renting.
Given that a house rental in the area is around $2200-$2400, I highly
doubt that renting would lead to a considerably better financial
position.

Here are some numbers:

loan amount: $339,000

option 1: 4.5% non-conforming 3-1 ARM, 30 yrs, 0 pts, $220/mo PMI
payment: $1,717.66
payment + plus PMI: $1,938

after 3 years:
balance: $321,828
int. paid: $44,664
equity: $17,172
PMI paid: $7920

option 2: 80/15/5
1. $285,600: 5% conforming 3-1, 30 yrs, 1 orig. fee pt
2. $53,550: 6.5% fixed, 15 yrs


orig fee = $2856

after 3 yrs:
balance: $272,301 + $46,558 = $318,860
int. paid: $41,895 + $9802 = $51,697
equity : $13,299 + $6992 = $20,291

In each case, downpayment = $17,850

I really don't know what to make of this. By avoiding PMI, I end up
with about $3000 more in equity (ok, equity is tough to estimate, but
I just assumed house value remains the same...). But I pay about $3000
for the origination fee. And I would have paid about $7000 more in
interest! But with the 80/15/5, there are tax benefits (which I have
no idea how to compute...).

So with the above numbers, what makes sense? It just isn't clear to
me... Should I do what many people do, and just pay PMI, with the
hopes that after the first year the house has appreciated enough to
remove PMI?

regards,

brian