On 2007-05-31, John A. Weeks III wrote:
One possibility is 80-10-10 financing. You take an 80% normal mortgage,
and make a 10% down payment, and take a home equity loan equal to 100%
of your equity (which is 10%). The home equity loan plus your down
payment makes 20%.

Doesn't the higher interest rate on the HELOC portion offset
the savings of not having PMI? Wouldn't one be better off to
work hard to scrape up as much down payment as they can, take
the PMI, then bust butt to pay down to 80% to eliminate the
PMI fee?

Possibly. It's going to be one of those "run the numbers" thing and see
which comes out better at the time you have to make the decision,
because it probably varies as interest rates change.

Although one thing to consider is that most people who get the HELOC are
probably going to keep using it. They start out with it at 10% to cover
half the down payment, and then as they pay that down, it becomes
available to borrow again, and a lot of people will then borrow again,
to buy furniture or renovate. So, there is going to be some value to
the lender of getting you into a HELOC from the start, which means there
is some incentive for the lender to make 80-10-10 using a HELOC more
attractive than 90-10 with PMI.