No one wants to pay extra for mortgage insurance. If you’re putting down less than 20 percent on a conventional loan, there are a couple of options. The first is lender-paid mortgage insurance, which – as it sounds – puts the lender in charge of covering those mortgage insurance premiums. However, you will still pay in the form of a higher interest rate. You’ll need to calculate what’s better for your budget: paying the PMI yourself or finding an LPMI option.
The second option for avoiding PMI is an 80/10/10 loan, which is commonly called a piggyback loan. In this situation, you can put down 10 percent and take out two mortgages. One will cover 80 percent of the purchase price, and the other covers 10 percent. You’ll never see a line item for PMI, but you will be paying back two mortgages with two sets of interest charges. Piggyback loans have two main disadvantages: you’ll pay two sets of closing costs, and the second loan will likely have a much higher interest rate, causing you to pay more overall than you might with a traditional loan with PMI.