PrivateMI or Piggyback Loan: Which Is Best for Me?
Some lenders offer low down payment loan products that don’t carry PrivateMI. The most typical is the piggyback loan, also called an 80-10-10. The piggyback stacks a high-rate small second mortgage on top of a lower-rate first mortgage. While a piggyback allows you to buy a home with less than a 20 percent down payment and no PrivateMI, it has pitfalls: • Your monthly mortgage costs could be higher. You can finance your mortgage insurance premium as part of your mortgage loan and pay lower monthly payments than you would with a piggyback loan. • You could face a big balloon payment. Many piggyback mortgages include a balloon payment in the 15th year. That payment could be difficult for you to make, or to refinance at a future interest rate that might be much higher. • You could lose your financial safety net. When you already have a second mortgage on your house, you most likely cannot get a home equity loan to cover such expenses as college tuition or major medical bills. • You can’t
