It’s for the Harveston house, right? Don’t do it. That is mortage fraud and you are complicit. And, run from that loan broker and tell everyone you know not to use him/her.

You shouldn’t have PMI with an 80/20 loan. I take it you don’t have a down payment, so you ethically have to accept the lender guidelines and pay a higher rate on the 2nd. Instead of participating in a mortgage fraud, either pay the higher rate on the 2nd and figure out how to pay it down early, or don’t buy.

I sympathize with you in that it’s easy to fall down the “slippery slope” because “everybody else is doing it”, but you can take the high road here.

BTW, the difference in the prop tax at 1.9% Harveston rate on 20% of 430,000, or $86,000, is $1634 annually for year 1. Then you can expect the 2% assessed value increase annually so the incremental tax basis year 2 would be $87,720 and the prperty tax would increase to $1686. You can expect this increase yearly, unless property values tank and are reassessed down. And, while the general public merrily deducts that entire property tax bill on form 1040 schedule A, the amount is not entirely deductible – the portions relating to special assessments and considered by the IRS not to be taxes. But that’s another story because the IRS is auditing prop tax bills and many people in Mello-Roos areas are going to be unhappy campers when audited. 🙁

The difference on a 1% rate increase on 20% of $340,000, or $68,000, is 70 cents per thousand monthly, or 47.60 per month, or $571 annually. It seems to me you are better off paying the higher interest rate on a 2nd, even if it is 3 points higher than the 1st, as the interest is 100% deductible, decreases annually, and can be paid off entirely.