The Mortgage Helpbook
A so-called piggyback loan can let you get away without a PMI.
When taking out a mortgage, you might find it very useful to consider taking out an 80/15 loan in order to avoid PMI. It could potentially save you a great deal of money, even though the upfront costs may be a little bit higher.
Assume the property you are interested in has a value of $300,000.00 and you are prepared to spend $30,000.00 as a down payment. With a standard 30-year loan at 5.000% and 1.000 point(s), you will have to pay $33,900.00 upfront for the closing and $1,561.92 every month from the day on. In the end, you will have paid $530,559.60 for your home.
If you opt for an 80/15 loan, you can avoid making PMI payments altogether. It may, however, require higher upfront costs, as two loans are to be taken out. For this scenario, we are talking about $35,600.00.
Your monthly payments, however, will be slightly LOWER at $1,469.20.
At the end of the day, you will have paid only $483,338.57, i.e. you will SAVE $47,221.03 altogether!