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For Sale by Owner Articles • Owners.com - Mortgages and Financing

Some ways to avoid paying PMI

Purchase a home using both a first and second mortgage. The first mortgage would be for 80% of the home's appraised value. The second mortgage, which would close at the same time as the first, would be for 10% of the home's appraised value. In other words, if you have a 10% down payment, your first loan would provide for the 80% mortgage with a second mortgage of 10%. This is commonly referred to as an 80 -10 -10 transaction. These are also available as 75/15/10 from certain lenders. While mortgage insurance premium payments are not tax deductible, the interest on a 2nd mortgage would be fully tax deductible. Another added benefit is that the second mortgage is typically amortized over 15 years, increasing your equity faster.
Some lenders offer self-insured programs. This type of loan would carry a higher interest rate than a standard loan with PMI. While mortgage insurance premium payments are not tax deductible, the interest associated with a self-insured mortgage would be tax deductible.

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