Quote:
Originally Posted by JasonCSU
I did this on a place I bought 10 years ago to avoid PMI; 80% on one mortgage and 20% on the other. I believe this is one of the lending practices that has since been eliminated.
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The more common scenario is the 80/15/5 or 80/10/10. 80% would be the primary mortgage on the house. The 15 or 10% would be a second mortgage on the house. And the 5 or 10% would be the cash down payment you would have to come up with. I did the 80/15/5 when I bought the house I'm in now back in 2001. Be aware because the second mortgage carries a higher risk over the first mortgage, your interest rate will be higher on this one. Unless things have changed, you're able to claim PMI on your taxes subject to certain qualifying factors. I don't know exactly what the terms are as when I did have to pay PMI, the Feds didn't allow me to claim it on my taxes. And when the Feds made the change, I wasn't dealing with PMI any more.
You have to do an analysis to see if doing a first and second mortgage to avoid PMI is worth it taking into account the ability to claim PMI on your taxes. Plus there are other ways to lessen the sting of PMI such as prepaying PMI and rolling it into your primary mortgage if the lender allows this.