Case study

Lower down payments and avoid PMI
Bryan and Joseph were buying their first condominium in Chicago for $425,000. They had good salaries and credit. Together they had $28,000. in savings, which was enough to put 5% down and to cover their closing costs. They wanted the security of a fixed rate mortgage loan and inquired about the best way to structure their deal.

Traditionally, a mortgage loan with less than 20% down payment would require the borrowers to pay an additional monthly fee known as private mortgage insurance (PMI). Today, borrowers can avoid paying PMI by splitting their loans into two parts. In this case:
• 80% first mortgage
• a 15% second mortgage or Home Equity Line of Credit (HELOC)

By taking out two loans, they saved approximately $133/mo. and avoided PMI.