Property Lein to avoid PMI

[project15]

My mortgage broker says that they have programs that allow the buyer to put down less than 80% and avoid PMI and NOT take out a second loan. I looked into this and on their website it says that they put a lein on your mortgage. My first impression is that this doesn't seem like something I want to get into. Anyone have any insight to this?

Here's the link that advertises it

https://www.guaranteedrate.com/no-pmi-insurance-mortgage.php

[momof1in150]

If you live in a state that uses "lien theory" as a way to pass title then you automatically get a lien when you get a mortgage. I live in a lien theory state so that means that I hold the title to my property and their is a lien on our property. If you live in a "title theory" state then the mortgage company/bank retains title to your property.

What I get out of the website that you posted was that they are splitting the loan into two loans to avoid PMI. This is not new. There have been 80/20, 80/10/10, etc loans for quite a while.

This is from the link that you posted.
"By turning one mortgage into two smaller loans, our MI Eliminator program means your pay less and maximize tax deductions."

If I was in a state that had "Title Theory" and was applying for a mortgage there is no way I would go with someone who would also put a lien on my property.

[InDebtInDC]

If you live in a state that uses "lien theory" as a way to pass title then you automatically get a lien when you get a mortgage. I live in a lien theory state so that means that I hold the title to my property and their is a lien on our property. If you live in a "title theory" state then the mortgage company/bank retains title to your property.

If I was in a state that had "Title Theory" and was applying for a mortgage there is no way I would go with someone who would also put a lien on my property.

Can you explain why you would not want a lien in a "title theory" state? The wording above was a little confusing.

[momof1in150]

Your property title is already held by the lender why would you want to have a lien also when it isn't required. Now, if you have a second mortgage they will put a lien on your property anyway. The link wants you to think that they have something new and it isn't. I just wouldn't want my 1st mortgage to have both a lien and the title held by the bank.

[InDebtInDC]

I'm still a little confused. What is the difference between a title with a lien and no title at all?

The bottom line is that you don't own your property free and clear. Does the difference affect how transactions can be made on the property?

[tripods68]

A title with a Lien = means you owned title (sole or joint) to a property with a lien against your property. In affect, you encumber your property (voluntary lien) that may affects or limits the fee simple title to real estate or affects the property's conditions or use. Fee simple refer to full ownership of the property in its highest form. The owner is entitled to full enjoyment of the property, limited only by zoning laws, deed or subdivision restrictions or covenants.

In other words, you don't want give up part of your ownership through a voluntary lien against your property to any lender just to avoid PMI. For example, if your house value rises say $200K in equity. They have every right to own part of this equity. The trick is in the language. In essence, they are more than putting a lien, but also has future stake in the equity in case it you sell it one day.

It is better to pay up front by putting 20% down or use 80-20 or 80-10-10method instead.

[project15]

Well, it turns out that it's exactly how momof1 described. I decided to go with an 80-10-10 with the 10% a line of credit (adjustable rate tied to the prime, ugh, but it's only about $15k and still tax deductible interest).

[InDebtInDC]

A title with a Lien = means you owned title (sole or joint) to a property with a lien against your property. In affect, you encumber your property (voluntary lien) that may affects or limits the fee simple title to real estate or affects the property's conditions or use. Fee simple refer to full ownership of the property in its highest form. The owner is entitled to full enjoyment of the property, limited only by zoning laws, deed or subdivision restrictions or covenants.

In other words, you don't want give up part of your ownership through a voluntary lien against your property to any lender just to avoid PMI. For example, if your house value rises say $200K in equity. They have every right to own part of this equity. The trick is in the language. In essence, they are more than putting a lien, but also has future stake in the equity in case it you sell it one day.

It is better to pay up front by putting 20% down or use 80-20 or 80-10-10method instead.

This makes sense. Thanks for the clarification.