PMI by the numbers. I will use 250K sales price. Several factors that are individual to the borrower. The main variable is credit score. Both the first loan and PMI is depended on your score. We take the middle score of the three main bureaus and the lower of these two if there is co-borrowers. Higher the score better the rates.
Second liens are also subject to credit score and you must have 680 or better to qualify. But its much simpler math:
700 plus = 4.99% 15 year term
680-699 = 5.5% 15 year term
Now if you want a lower payment based on the 30 year payback you get a 15 with a balloon and add .25% jjto the rate above.
Now for the first loan you also have a fee to Fannie to use the second lien, 1.0% of the loan so above is 2000 dollars. I usually roll that into the rate of the first so your cost is having 4.0% loan on the 80% first versus 4.25% on that first loan. You could pay the fee in closing costs but no one opts for that.
4.0 rate is 1074 per month. 4.25 rate 1106 or 32 dollars per month and 384 per year in extra costs. Then you pay an additional 500-700 admin fee in closing for the second lien lenders.
Back to PMI. If your credit score is 750 then your payment is 76 per month. If 680 your payment is 136 per month or 60 per month.
You can calculate PMI here but be advised you need an accurate middle credit score to input in the system
https://www.mgic.com/rates/ratefinderSo the final variable is how bullish is the market you are buying in. If like Dallas, Austin etc you could gain 12% equity in short order, say 2 years. So absorbing the PMI at 750 score, 24 months is 1824 and offset on the lower interest rate of 4.0 saving 768 and net cost for PMI is 1056 plus second appraisal of 500 so final cost is 1556.
with the second lien you are accepting the 32 per month extra on the first lien until you sell or refinance and also incur 1.0-1.5% more on your money on the second until you refi or sell.
Bottom line, there is no simple answer to the question. The only solution that is correct is based on your unique file and circumstances. I always send to my clients a side by side closing estimate so they can compare the two options and make a decision for them. It is usually easy decision when the client can see both options.