This is an excellent loan for those that are lacking the down payment required for other types of mortgages.
The 80 20 mortgage is simply two loans for 100% of the purchase price. It is a first mortgage at 80% of the purchase price with a 20% second mortgage.
If you are a conforming borrower, doing your loan in this manner will save you from having to pay mortgage insurance. Mortgage insurance is almost always required when you have less than 20% down. But with the 80 20 loan you avoid this necessary evil.
If you are a sub-prime borrower, doing you loan in this manner will typically keep your interest rates ½% to 2.5% lower than doing a 100% one loan. A 100% one loan is simply one loan for the entire purchase price.
Many times you will have two choices when it comes to the second mortgage portion of the 80 20 mortgage. The second mortgage can either be a fixed second mortgage or it can be a line of credit.
If it is a fixed second mortgage. The interest rate is fixed for the entire length of the mortgage. Most fixed second mortgages are a 30 due in 15. Meaning that the second mortgage is amortized over 30 years, but is due in 15 years. Basically it is a balloon payment. Don't let this scare you. Statistically people refinance or sell their home every 7 to 9 years any ways.
If it is a line of credit as the second mortgage. The interest rate will fluctuate as the Federal Reserve adjusts the prime interest rate up or down. The benefit of going with the line of credit as the second mortgage is that the interest rate is normally much lower than the fixed second mortgages rate. It can be 2% to 5% lower.
If you are considering doing the 80 20 loan have your loan officer compare the two different options if you have both available to you.
You may also want to consider an 80 20 interest only loan. The interest only loan could save you hundreds of dollars in mortgage payments every month. This can help you purchase a more expensive home or keep the payments down on the home you want to buy.
About The Author
Matthew Allen is a mortgage consutlant with Action Brokerage Services, Inc. in Medford Oregon. He is also the author of "How To Buy A Home With Zero Down, Even If You Have Damaged Or No Credit" You can visit his website at http://www.realmortgageadvice.com.
The investment need of an individual varies with time. Thus... Read More
Essentially there is little difference between the process that one... Read More
So you have a mortgage on your home or planning... Read More
Have your home's appreciation grow twice as fast.For Seniors over... Read More
The first time you purchase a home is an exciting... Read More
No money down mortgage loans enabled more people to own... Read More
Tapping your home's equity to pay college expenses, consolidate credit... Read More
Mortgage underwriters can be a suspicious bunch. If you have... Read More
As interest rates have risen in the last six weeks... Read More
If you're looking for a good home improvement loan rate,... Read More
With today's relatively low interest rates and climbing property values,... Read More
Imagine this: you've found the perfect house, and feel lucky... Read More
Recently I was driving in my Car and I heard... Read More
At some point as you're writing out your rent check,... Read More
Refinancing vs line of credit are two popular options you... Read More
Bridging finance is a short-term loan that is used as... Read More
Mortgages have assumed a number of characters from the time... Read More
A brief list of some of the most common Mortgage... Read More
If you have a mortgage on your property, whether it's... Read More
Fixed rate or adjustable rate mortgages are two choices of... Read More
The best way to explain why a mortgage professional is... Read More
There are many mortgage products available on the market today.... Read More
Because the new bankruptcy laws go into effect on October... Read More
Simply stated, a reverse mortgage is a loan that enables... Read More
A VA guaranteed mortgage is the usually the best way... Read More
A tracker mortgage 'tracks' the Bank of England base rate,... Read More
Owning your dream home need not just be a dream.... Read More
"Own your home free and clear in 3 to 4... Read More
Almost two thirds of first time buyers accept the first... Read More
Before you borrow money on your home's equity, think twice... Read More
This is a guide on how to get the best... Read More
Reverse Mortgages are exploding in popularity and as the baby... Read More
Refinancing your house's mortgage is not the same thing as... Read More
If you are among the millions with less than perfect... Read More
One of the things that bothers me about the mortgage... Read More
A home equity loan is a loan based on the... Read More
When the time comes to do work around the house,... Read More
A home equity loan allows you to cash-in on the... Read More
Perhaps you're a homeowner in need of some quick cash.Maybe... Read More
Finding a good lender to help you with refinancing your... Read More
Reverse Mortgages, Most Common Features:Many offer special appeal to older... Read More
Purchasing a home involves certain important, even essential, steps that... Read More
Imagine paying your mortgage off in 15 years! Think of... Read More
When it comes to a reverse mortgage, wise consumers weigh... Read More
The home equity loan has become quite popular in the... Read More
If a mortgage could be paid off in five years... Read More
As the term implies, with a fixed rate mortgage the... Read More
You bought a house and you were promoted to the... Read More
The bills are out of control and you need a... Read More
Private mortgage insurance is an excellent method for homebuyers who... Read More
Home equity loans and lines of credit are useful tools... Read More
It is a curious fact of human nature that people... Read More
Getting a home loan with bad credit has actually never... Read More
For the first time since May 1996 reports have indicated... Read More
So you have a mortgage, and you need to refinance... Read More
Households across the country are finding themselves in a similar... Read More
Many Homeowners are not aware of all the options that... Read More
Your home is a source of pride and accomplishment. Did... Read More
You have probably received refinancing offers in the mail or... Read More
What could you do with $10,000? Well, you can have... Read More
When you're looking for a mortgage, whether it's a first... Read More
Here is a useful flexible mortgage guide. Flexible mortgages are... Read More
In many ways a commercial mortgage is just like a... Read More
Using a home equity loan to get out of debt... Read More
When you need a mortgage -- either because you are... Read More
1. Save on your income tax.Yes, something good can come... Read More
Mortgage Refinance |