Piggyback mortgages were quite popular before the year of 2007 as a tax deductible alternative for conventional PMI premiums. 2007 broke this subtle balance as Congress made PMI premiums tax deductible, too, but for that one year only. Being limited to certain restrictions and so far unpredictable future, PMI still leaves some room for the piggyback to kick and prove its worth.

First, let me explain how the Piggyback Mortgage option works. If a homebuyer needs to borrow more then 80% of the property’s purchase price, he either goes for one conventional mortgage and pays Private Mortgage Insurance (PMI) premiums, or tries to avoid it by opting for either Lender-Paid Mortgage Insurance (LPMI) or a Piggyback Mortgage, also known as 80/20. Actually, “80/20″ explains a lot by itself: the mortgage is, in fact, a combination of a primary mortgage for 80% of the purchase price and a secondary mortgage for an amount required to fill up after the down payment. The more comprehensive names for this mortgage sometimes are 80/10/10, or 80/15/5, or 80/5/15, indicating the details of the secondary mortgage - 10% borrowed/10% own down payment, 15% borrowed/5% own down payment, 5% borrowed/15% own down payment, respectively. Read the rest of this article »

Lender-Paid Mortgage Insurance (LPMI) is one of the ways, along with the Piggyback loan, to avoid the notorious conventional Private Mortgage Insurance (PMI) if you borrow more than 80% of the purchase price while buying yourself a home.

To be perfectly honest, you, as the borrower, are the one to pay this insurance anyway. The amount the lender pays as insurance premiums is charged on to you through a higher interest rate on your mortgage. The difference lies in how the amount of your monthly payments towards the insurance is determined. Technically, the lender shops for the insurer himself, but unlike PMI, in the case of LPMI he is interested to get a better deal with a lower insurance rate, as there is no referral involved and the resulting interest rate on his mortgage products has to be still competitive. Consequently, the borrower ends up with a higher interest rate on his mortgage, but does not have to pay private mortgage insurance. How good is that? Read the rest of this article »

If you are sure, that you will be able to put down at least 20% of the property purchase price, don’t bother to read this article - there is no way any lender should make you pay this insurance. Mortgage insurance is something that happens to you only if you cannot make a 20% down payment.

Well now, if are still reading, that means you are looking for the best way to attend to the 20% business.  Read the rest of this article »