Should I go to a second mortgage company if I want to avoid PMI?


Many people would consider going to a second mortgage company to avoid paying private mortgage insurance. To avoid a PMI, they are willing to take a piggyback - 80/10/10, for example. Is it worth it?

Sometimes it will be - in case homes are appreciating. However, the strongest argument against using a second lien instead of a PMI is that the PMI can be cancelled as soon as 20% equity is reached, while you will have to carry on the second mortgage until you pay it off.

However, the second mortgage interest is tax-deductible while the PMI payments are not. Before you make a choice, you should calculate the possible scenarios with a PMI and with a second mortgage in a combo loan (piggyback) to know which one will be better off to take.

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