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What is mortgage insurance?

By the numbers ... 80-10-10 plan

If we compare the purchase of a $150,000 home under the 80-10-10 plan to a standard fixed mortgage plus mortgage insurance, we find that the former is $35.36 cheaper each month.

Here's how it works: Under the 80-10-10 plan, the 10 percent down payment on a $150,000 house is $15,000. The first mortgage is $120,000 at 7 percent, which comes to a monthly payment of $798.36. The second mortgage for $15,000 has a 9 percent interest rate, making a monthly payment of $120.69. The total monthly payment for both loans is $919.05.

With a $15,000 down payment, one mortgage of $135,000 at 7 percent has a monthly payment of $898.16, plus mortgage insurance of $56.25, making a total payment $954.41.

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