Mortgage loans with equity or a down payment of less than 20% usually requires private mortgage insurance (PMI).  But there are some attractive alternatives to PMI on the market.

Many lenders will allow you to avoid private mortgage insurance (PMI) by mixing a first mortgage and a “piggyback” second mortgage, home equity loan, or home equity line. So, in this way you can reduce your monthly payments below a loan with PMI.

Often you can put a down payment of only 5 or 10%.

There are several advantages of this approach as compare with PMI payments. You will have:

• Lower monthly mortgage loan payments
• Possible tax deductibility of interest. Note, that PMI is not deductible.
• Possibility of lower Interest rate by keeping your first loan within conforming loan limits.

Other options include getting the lender to build the risk of the loan into the rate of interest. In this case you will pay a higher interest rate but no private mortgage insurance. Often the payment will be higher going the self insured route but the after tax cost, of the self-insured loan will probably be lower.

Some lenders will even let you reduce the interest rate when the loan is paid down to 80% loan to value. Remember, that you can cancel your PMI once it reaches 80% of equity.