Tim Smith wrote:

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.

Excuse me if this was already brought up - There's a couple of other
considerations which may not have been mentioned earlier in this thread: HELOC
interest is generally tax deductable in the US, whereas PMI premiums are not.
This can partially or completely offset the diference between a PMI premium and
the higher HELOC interest.

Second is that some lenders are a pain to deal with to get PMI waived. If they
allow it at all, in many cases you have to pay for a new appraisal. At a minimum
you may need to provide a current real estate tax assessment that supports the
higher valuation.

By going with a HELOC you avoid all of this. The discipline to pay off the HELOC
and not use it for the family vacation or similar discretionary purchase is
critical though...

--
"Tell me what I should do, Annie."
"Stay. Here. Forever." - Life On Mars