I'm deciding between two lenders for the mortgage on this house. It's interesting; I'm putting down 10% and getting a 3.375 interest rate from both banks, but their closing costs and monthly payments differ a bit.
Bank A will charge me PMI (since I won't have 20% equity) and slightly lower closing costs.
Bank B will not charge me PMI but they have higher closing costs.
After 1 year/12 payments, Bank B is 7% more expensive
After 3 years/36 payments, Bank B is 1.2% more expensive
After 5 years/60 payments, Bank B is .36% less expensive
After 7 years/84 payments, Bank B is 1.47% less expensive
I can't go a lot further than that though - because somewhere around year 7 or 8 the house would probably have 21% equity and PMI would be dropped. I did run some numbers assuming that PMI would drop after year 7, but Bank B still comes out a bit ahead (after 30 years it would be 1.3% less expensive), and goodness knows the house has plenty of room for me to grow into.
So as long as I stay in the house more than 5 years, Bank B seems like the ever-so-slightly better bet. I do have the cash, though it would be nice to have lower closing costs since I will have a lot of start-up costs... but I think I will keep my eye on the big picture.
Am I missing anything? Is it vitally important to keep closing as costs low as possible?