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I bought a home a little less than 2 years ago for $125,000. I only put 5% down and have been paying PMI of about $78/month since then.

I read of the 80/15/5 type mortgages here on the message boards and am considering something similar through the use of a home equity loan. I'm considering a home equity loan of $15,000 with a 10 year term and a rate of 8.5%.

I've created an amortization in excel it looks like a good solution. The interest per payment is less (assuming it's tax deductable) than the PMI I'm current paying, and I would pay off the first mortgage almost 8 years earlier. It has the added benefit of getting me into a plan where I don't have to pay the fees for online access & bill payment for my existing checking account. The $8/month savings would effectively lower the interest rate by over a point.

Am I missing anything? I read the info from the irs on whether interest on a home equity loan is deductable & I think it would be since I'm applying the entire amount to the equity in the home.

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