Finance
A Colorado buyer is financing a home with an 80% first mortgage, 10% second mortgage, and 10% down payment (piggyback). One advantage of this structure over a single 90% LTV loan is:
ALower overall interest rates on both loans combined
BAvoiding PMI on the first mortgage since the first mortgage LTV is 80%✓ Correct
CQualifying for a larger loan amount
DAvoiding the need for an appraisal
Explanation
The piggyback strategy avoids PMI on the first mortgage because the first mortgage LTV is exactly 80%. Without PMI, the combined payment on two loans may be less expensive than the PMI on a single 90% LTV loan, though interest rates on second mortgages are typically higher.
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