This is why buying a house is so much fun. You get to have conversations like this:
Anastasia: Our mortgage advisor suggests we do a two-tiered 80/10 loan so we don’t have to pay a PMI
Me: Won’t that – uh – cost more or something? And don’t 80 and 10 add up to 90?
Anastasia: Right, because then you can put 10% down.
Me: Oh, right. Yeah.
Anastasia: Let’s check fool.com and see; I think I read something on there because I’m about a million times smarter than you and have actually done some research on houses rather than hoping that the entire situation will resolve itself.
Me: OK, I found something that says “some lenders may have fancy ways to allow you to avoid PMI while still putting down less than 20%. For example, they might offer you a second-tier mortgage to make up the difference. The interest on the
second loan will be higher, but it will be tax deductible, whereas PMI is not. As always, it pays to do your homework and explore as many options as you can with your lender.”
Anastasia: Right, that’s it. That’s why he was suggesting it, because we don’t have 20%, and then at least we can deduct it on our taxes. Coupled with our first time home owners tax savings, it might make sense to do this
Me: When we get the paperwork, let me apply what I like to call “math” to the problem, which will involve me staring at a piece of paper whilst clutching my pencil and hoping like hell that I look intelligent. Then I’ll guess which one is right and fervently pray that I don’t completely piss away our life savings in some termite infested hellhole. I wish I was dead.