There is one way to get a low-down payment loan without paying for private mortgage insurance (PMI) . It’s called an 80/10/10 ( eighty- ten-ten) or an 80/15/5 9 (eighty- fifteen-five) loan.
The concept here is that you’re essentially getting two loans simultaneously, a regular 80 percent loan-to-value ratio first mortgage, and a home equity loan. With an 80/10/10, the first mortgage is at magic 80% of the sales price of the home, the home equity loan is for an additional 10% of the cost, and the final 10% represents your down payment. With an 80/15/5, the home equity loan is for an additional 15% of the cost of the home, and you put down 5%.
There are pluses and minus to the 80/10/10 loans. The good thing is that you don’t pay PMI. and, because home equity loans to $ 100,000 are tax deductible, you can deduct the interest you pay. While PMI was deductible for a period of years ( through2016), the deductibility has expired, and there are no indications it will be renewed. unfortunately, the interest on the home equity loan part of an 80/10/10 tends to higher than on your regular loan, which means you’ll pay more in interest. But since it’s tax deductible, the numbers work out almost even between a PMI low-down payment loan and an 80/10/10.
