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First Mortgage Plus Second Mortgage = No PMI


Private mortgage insurance (PMI) covers the lender against borrower default. If you borrow more than 80% of the value of a home when you refinance you will be required to pay PMI. If you don't have 20% available for a down payment, consider taking a first mortgage and a second mortgage.

Some people call this strategy an 80-10-10 loan: 80% on the first mortgage, 10% on the second mortgage, and 10% down. (Of course, this strategy assumes you have sufficient funds available to put 10% down.) While the second mortgage typically has a higher interest rate than the first mortgage, the net result is a lower payment in total if PMI is eliminated. And, mortgage interest is likely to be tax-deductible while PMI payments are not, which further increases your savings.

Personal – Homebuying and Refinancing

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This article contains general information only. Sunflower Bank is not, by means of this article, rendering accounting, financial, investment, legal, tax, or other professional advice or services. This article is not a substitute for such professional advice or services, before making any decisions related to these matters, you should consult a qualified professional advisor.