FHA (95-5) or HEL (80-15-5) piggyback. Which one is better?

3 Replies

I'm looking to put 5% down (50k) on a multifamily that I plan to move into as my primary. i'm having difficulty determining if I should get an FHA (95-5) or HEL (80-15-5). The HEL would come from my current primary residence which has a 3.5% interest rate with 20+ years left.

loan amount 950000

FHA 95-5 scenario) MIP=950,000*0.0175=$16625 up front. PMI =0.0085*950,000/12=$672 monthly.

HEL 80-15-5 scenario)  HEL closing cost on 150,000 = approximately $6000.  20yr at 6.25% = $1096 monthly

The calculation above is kind of comparing apples with oranges.  Are there other calculations I should do?  I'm hoping someone here on BP  can help me understand what metrics I can look at to make sure I pick the best option for me.  In addition, how would refinancing a few years down the road change the equation/outcome?

Thanks in advance!

Conventional loan while utilizing your HELOC for the down payment would be the cheapest option across the board. But if you have any plans of future RE investing, then you may want to save that HELOC for future use and go with 3.5%-5% down FHA now

Hey! @Darrick Lowe A few things to keep in mind:

* If your current PR is within 100 miles of the new PR, and doing an FHA loan, then you will not be able to use rental income from the current PR to qualify for FHA financing. You will need to be able to carry both the loans to qualify for the purchase.

* If you are moving just a short distance from the current PR and/or moving from a SFH to multi, then make sure you have very good explanation letter to convince the underwriter why they should approve this purchase as an owner occupied.

With regards to the financing options, I always prefer conventional, so PMI eventually drops off. But you will not qualify for a 5% down Freddie loan, since you already have an another property.