Question: Hey all, was wondering if someone could share some advice for a first time buyer. I am getting a house with a 80/15/5 loan. The 15% loan has a very high interest rate. I’m thinking about getting a loan from another bank for the amount of the 15%, paying off the first lender, and thereby reducing my monthly payments due to the smaller interest rate. The lender’s rate for the 15% is 8.45 on a 15 yr balloon payment. Could I go to another bank and borrow the amount for the 15% at 6.3% and pay the first lender off? Is there some sort of catch I’m missing?
Answer: Hvae you looked at simply doing a straight 95% loan? People do this 80/15 thing to avoid PMI. If you do the math, you often find that the straight 95% loan with PMI is cheaper both by the month and over the long run than the high-rate 2nd loan scenario.
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