How to Avoid Mortgage Insurance

Financing Without Private Mortgage Insurance

Low down payment financing and refinancing is available without private mortgage insurance (MI). This is accomplished by combining an 80% LTV first mortgage with a second mortgage. The most popular choices are referred to as 80/10/10 and 80/15/5 financing.

The terminology 80/10/10 represents a 80% LTV first mortgage, a 10% LTV second mortgage, and 10% invested by the borrower. An 80/15/5 is a 80% LTV first mortgage, a 15% second mortgage, and the remaining 5% invested by the borrower. Sometimes the second mortgage is referred to as a piggyback loan.

The financial advantage to the home owner can be substantial because of reduced monthly payments and additional tax deductions. The extra tax benefit comes from deducting the interest on the second mortgage, whereas mortgage insurance is not deductible. The advantage is clear when you compare rates and closing costs. Ask for a closing cost worksheet to make your own comparison.