Washington Mutual Inc. announced a new product that requires no mortgage insurance and only a 10.1% down payment.

The secondary marketing agencies Fannie Mae and Freddie Mac may not buy loans with down payments of less than 20% without private mortgage insurance. But Wamu, as the largest thrift in the United States, puts half the loans it originates into its own huge portfolio.

Wamu's new product-dub-bed "Advantage 90"-eliminates mortgage insurance in exchange for a slightly higher initial interest rate.

Borrowers would pay about as much as they would for a 10% down payment mortgage with insurance, Wamu said, but "may be able to claim more tax- deductible interest." Insurance premiums are not tax-deductible.

The product lets borrowers reduce their interest rate if the house appreciates enough that the loan balance becomes just 75% of the home's value, or when the loan balance is reduced to 80% of the home's value when the loan was first made.

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