mortgage question

[JasonAndJulie]

Oh sorry, I re read the thing I posted. Looks like you are right. It would be for a minimum of eleven years, no matter how much you put down. Wow.

[RPS13]

To the OP, the extra interest rate on the 10% is usually around 3-5%, sometimes they have balloon payments (i.e. 30 yr loan, but the full balance is due at 15 years).

In general, eliminating PMI on a 30 yr loan is ALWAYS the smart way to go. When you factor in that you're borrowing that 10% at whatever your loan rate (say 4% for easy comparison), then calculate what 90% LTV PMI is for a 30 year conventional, you'll see that your effective interest rate on that 10% is on the order of 9-11%. I know it was over 9% for us when we briefly considered 10% down with a 3.375% loan.

The extra interest on the 10% secondary mortgage is usually quite a bit less, and you can just pay extra into the principal for a great return on your money. If you've got an 8% loan on the second loan, paying down is like a guaranteed savings account giving you ~6% (accounting for the tax advantages of itemizing mortgage interest here). No where can you get 6% guaranteed these days on your money, so that situation makes it look even better vs. PMI which is just a pure cost and you're stuck paying it until you can convince the mortgage company to drop it sometime in the far future (they sometimes drag their feet even when you hit 78% LTV).

[Mr. Krinkle]

I did an 8-15-5 back in 2009. No PMI and I don't escrow.

I'm glad I did it.