"We are purchasing a $400,000 home that we want to finance with a 30-year fixed-rate mortgage. While we can more than afford the cost of a 20 percent down payment, I would prefer to keep my money in my investments instead. I was thinking of financing 100 percent (using an 80/20 to get out of paying PMI) but was unsure whether this type of loan structure would result in a higher interest rate on the first mortgage?" Taking a 100 percent loan with a piggyback -- a first mortgage for 80 percent of value and a second mortgage for 20 percent -- would result in a higher overall cost than an 80 percent loan with a 20 percent down payment. In part, the higher cost will be in the higher rate on the second mortgage. But in addition, either the rate on the first mortgage will be higher, or the total loan fees will be higher. To illustrate, on Oct. 17 I shopped for a purchase loan on a $400,000 property in California. If I put down 20 percent, I could get a 30-year, $320,000 fixed-rate mortgage...
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