Heloc for DP 15% with PMI vs 20% Without

[Justin Juhan]

Good day,

My wife and I are looking at buying a second rental property. We opened a Heloc on our primary ($60k) and plan to use that for the down payment.

I have not spoken with lenders but from my prior experience I'm assuming we will have a min down payment of 15%.

We would likely do a one-time "draw" at around 6.5-7% interest on the Heloc for the down payment.

My question would be is it better to put 20% down and not pay PMI but pay 7% interest on that extra 5% down.

OR Better to put 15% down, Pay PMI, but amortize that 5% at ~4.5% interest over 30 years?

Key aspects:

I would estimate our purchase price to be around $150-170k.

Heloc is not interest only, Partially amortized.

I would never agree to a loan that does not get rid of PMI after 80% LTV

Cash-out refi is not really an option in our market unless we find a diamond in the rough because the LTV is not worth the trouble.

Thanks!