Lender Paid Mortgage Insurance
To eliminate monthly mortgage insurance, you don’t always have to put 20% down.
When using Conventional financing with 3, 5,10 or 15% down, you could go with an option called Lender Paid Mortgage Insurance. Lender paid mortgage insurance eliminates your monthly mortgage insurance, however it comes with a higher mortgage rate. To determine if lender paid mi is the best option for you, we would compare it with the other options to see if it makes the most sense for you.
For some people, mortgage insurance may be tax deductible (income limits apply), but for others it’s not. If you cannot deduct your monthly mortgage insurance premiums, you may benefit from the lender paid mortgage insurance option, since you may still be able to deduct your mortgage interest each year.
Financed MI & Upfront Premium MI are also options that can work to eliminate monthly MI in some scenarios. Mortgage Insurance Explained details the strategies for all mortgage insurance types.
If you plan on putting less than 20% down, we will help you determine the best mortgage insurance strategy to suit your overall goals.
*Tax law is always changing and we are not tax advisers, so always be sure to speak with your CPA about the current tax implications
Combo Loan
Eliminate the need for mortgage insurance by using a second mortgage. This is commonly referred to as a combo loan, 80-10-10 or 80-15-5. What this means is that you take out a first mortgage at 80% of the sales price and then a second mortgage to cover the additional 10-15%, leaving you with only 5-10% for the remaining down payment.
The first mortgage at 80% eliminates the need for mortgage insurance. The second mortgage is typically a home equity line of credit.
Home equity lines of credit are also used many times to finance more than the county loan limits allow. Since the loan limits in most high cost areas stop at $970,800, many times applicants looking at homes in the $1M plus price range might opt to take out a first mortgage at 80% of the purchase price up to the loan limit and then take out a second mortgage up to 95% total combined loans, leaving the down payment still just at 5% down. This allows for a low down payment even when the price of the home is much higher than the loan limits.