Conventional loans with equity or a down
payment of less than 20% will normally require private mortgage
insurance (PMI). However, in many circumstances there are
advantageous alternatives to traditional PMI.
The factors you will need to carefully consider are your estimates of:
The piggyback loan series is available with a down payment of as little as 5 to 10% and may be used with many of our fixed rate and adjustable rate loans.
There are two key factors to consider with piggyback loans:
The total payment of the first mortgage and the piggyback loan may be lower than a single loan with PMI. However, you can have PMI eliminated on a loan by either:
Of course, if the home has appreciated enough for you to have 20% equity, you could refinance the first and second loan and be left with one new loan without PMI.Self-insured mortgages
Another alternative to a traditional PMI loan is to build the lenders additional risk into the loan itself. The loan will have a higher interest rate but will not require traditional PMI. The lender for the loan covers the risk internally.
If you live in the home long enough and/or the appreciation rate is high, you may be able to have PMI removed from the loan early. By eliminating PMI you will have a lower payment than a self-insured mortgage. Of course, if the home has appreciated enough for you to have 20% equity, you could refinance to a loan without PMI.