Denver Lenders - Piggyback Loan?

[Chris Bunya]

My wife and I are looking to buy our first home (duplex) and start house hacking in the Denver metro area. We have outstanding credit, no debt, and a good bit of savings. We've been approved for a conventional 30 yr 80/20 loan but we would prefer an 80/15/5 so we don't have to use up all of our cash on the down payment and we'd like to avoid PMI. Are these types of piggyback loans still available? If so, how do we go about finding a lender that can provide one? Our potential lender seems to be pretty fixated on a traditional 80/20.

[Jeff Dulla]

@Chris Bunya  there are a few lenders that will 80/10/10 but only on a duplex (not three or four units). While this is something I can certainly give you info on, I wanted to write about something else as well.

You can't really get a 10% down Pmi structure on this deal but I have an issue with people hating on PMI. PMI has become a dirty word, like ARMs for all the wrong reason. Yes, if you can put down 20% without completely liquidated all your assets, it is probably best. But Pmi is at one of the cheapest points it has been since I have been doing this (about ten years).

If you think about it as an interest rate - like the cost of your second mortgage, it's easy to illustrate. Pmi may cost .500% and if planning properly, may only last 3 to 5 years if you are prepaying your mortgage and the property appreciates. At the point you get to 20% equity, you can get the Pmi removed without refinancing.

Compare that to the HELOC/second mortgage. Instead of .500% in cost, you are talking 5.00%+ in costs. And the amount extended can be reduced at an accelerated pace by prepaying (actual the only way a heloc balance will go down)., but unlike PMI will not simply drop off once your equity position reaches 20% through any appreciation.

I don't think Pmi is bad at all for the right situation.