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Straight 5% Down (
Single Loan w/ PMI )
Simplest Transaction
Lender Sometimes More Forgiving
Slightly Lower Loan Rate but More Expensive Overall
Highest House Payments
Smaller Tax Deduction of Monthly
Expense
This is the old standby common
method of financing a home with only 5% down payment. The lender can
be more forgiving sometimes due to the fact the lender's exposure is
protected by the PMI (Private Mortgage Insurance) policy. The house payments
will be higher because the PMI cost is added to your mortgage payment.
The expense you pay for PMI is also NOT tax deductible. |
5% Down ( 2 Loans
80% 1st Loan 15% 2nd Loan )
More Complex
Stricter Underwriting
Slightly Higher Loan Rate
but Less Expensive Overall
Absolutely the Cheapest Way To
Go
Smaller Total House Payments
Highest Tax Deductibility
This has proved to be the
PREFERRED method of financing a 5% down transaction as long as you can
qualify for the loan using stricter underwriting. The total of your
house payments between the two loans will be less than one loan payment that
has PMI added to it. You have the highest tax deduction at the end of
the year even though your payments are less because both 1st and 2nd lien
interest on your homestead are tax deductible.
*NOTE...2nd
lien companies often have a $10,000 to $15,000 minimum 2nd lien loan amount.
Be mindful on smaller transactions below a $100,000 Sales Price. |
