You don’t really have to put 20% down on a house (and with home prices so high these days, who can afford that?), but if you don’t, you have to pay for private mortgage insurance, which can be a costly add-on to your monthly bill. So one way or another, you’ll pay.
But there’s a kind of loan you can use to avoid PMI—and save money at the same time. You may not have even heard of it! It’s the 80-10-10 mortgage, commonly referred to as a kind of piggyback mortgage.
It is, in fact, two loans that cover most of your mortgage while you only put 10% down. The first mortgage covers 80% of the home’s value, 10% is what you put down, and the second loan is for 10%. The second loan (the piggyback) is taken out as a home equity line of credit (HELOC) that closes at the same time as your 80% mortgage.
So, you effectively have a mortgage with only 10% equity, but you don’t pay PMI (versus getting a loan for 90% of the home’s value with a 10% down payment and paying PMI).
Often, that’s the point of a piggyback mortgage—to avoid PMI when you don’t have enough to put 20% down. But it’s not the only reason; some people use piggybacks to pay for a home a conventional mortgage wouldn’t cover, essentially avoiding jumbo loans.
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For all of your real estate needs in the Auburn-Opelika area please contact me at (334) 332-7263 or email me at LauraSellers01@Gmail.com or visit my website. I look forward to helping you find the home of your dreams or sell your existing home.
