Using a Second Mortgage for an 80-20 No Money Down Home Purchase Loan
Many renters want to own their own home, but they simply don’t have the down payment to make the purchase .
If you’re able to afford a house payment as much as your monthly rent, an 80-20 no money down loan could get you out of the rent trap .
(80% first mortgage - 20% second mortgage) It allows people to buy without a down payment, or for those people who would prefer not to touch their savings to get into a house, says mortgage expert .
What we're seeing is a lot of young professionals, he adds .
People who have gotten out of college and have good jobs .
They have good credit, but they haven't had the opportunity to accumulate a lot of savings.
The 80-20 loans are also known as piggyback loans .
the buyer takes out a loan for 80% of the cost of the home .
Then takes out a second mortgage for 20% of the loan to use as a down payment .
the homebuyer has three options for the 20% part of the loan .
Most often the 20% loan is secured from a separate lender, but look up for the second loan to have a higher interest rate.
MortgageDaily.Com shows the second lender-the one who is only financing 5% to 20% of the loan-doesn't see much benefit from lending the money unless he can actualize a high interest return .
If the buyer borrows from the same financial institution, they could open a home equity line of credit and withdraw two separate amounts; one amount for 80% of the loan and 20% for the down payment .
The third option is to borrow the 20% part of the loan directly from the seller, also known as a purchase money loan .
Kipplinger.com shows there is a down-side to the 80-20 loan .
you likely will have to pay a higher interest rate, buy private mortgage insurance (borrowers usually pay 20% of a home's value to avoid this) and make bigger monthly mortgage payments .
Plus, it can be dangerous to be so highly leveraged .
But in an expensive housing market, it can be the only way to afford a home.
Doug Duncan, chief economist of the Mortgage Bankers Association of America says, Most banks offer special mortgages to low- and moderate-income borrowers because the Community Reinvestment Act requires financial institutions to provide a certain share of business to these economic groups .
But no- and low-down options for jumbo loans (higher than $300,700) are harder to find.
The costs of the higher interest rate from the 80-20 mortgage are sometimes off-set because there is no mortgage insurance built into the loan .
the State of California only requires mortgage insurance for all home loans exceeding 80% loan to value or LTV .
An 80-20 loan allows the home-owner to step aside the insurance requirement, thus having a lower monthly payment.
If your goal of an 80-20 loan is to have a lower monthly mortgage payment, another option is the T.A.M.I .
program .
the T.A.M.I .
program includes mortgage insurance where as the 80-20 program doesn’t require mortgage insurance .
Robin M .
Root; a senior level loan officer says the T.A.M.I .
provides lender-based mortgage insurance in exchange for a slightly higher interest rate .
Since the IRS, allows a deduction for all interest paid for home loans, the cost of the mortgage insurance is tax deductible .
And, unlike the 80-20 loan program, when the buyer has equity built up, the homeowner has the flexibility to open a home-equity loan for home improvements or cash emergencies.
Many renters want to own their own home, but they simply don’t have the down payment to make the purchase .
If you’re able to afford a house payment as much as your monthly rent, an 80-20 no money down loan could get you out of the rent trap .
(80% first mortgage - 20% second mortgage) It allows people to buy without a down payment, or for those people who would prefer not to touch their savings to get into a house, says mortgage expert .
What we're seeing is a lot of young professionals, he adds .
People who have gotten out of college and have good jobs .
They have good credit, but they haven't had the opportunity to accumulate a lot of savings.
The 80-20 loans are also known as piggyback loans .
the buyer takes out a loan for 80% of the cost of the home .
Then takes out a second mortgage for 20% of the loan to use as a down payment .
the homebuyer has three options for the 20% part of the loan .
Most often the 20% loan is secured from a separate lender, but look up for the second loan to have a higher interest rate.
MortgageDaily.Com shows the second lender-the one who is only financing 5% to 20% of the loan-doesn't see much benefit from lending the money unless he can actualize a high interest return .
If the buyer borrows from the same financial institution, they could open a home equity line of credit and withdraw two separate amounts; one amount for 80% of the loan and 20% for the down payment .
The third option is to borrow the 20% part of the loan directly from the seller, also known as a purchase money loan .
Kipplinger.com shows there is a down-side to the 80-20 loan .
you likely will have to pay a higher interest rate, buy private mortgage insurance (borrowers usually pay 20% of a home's value to avoid this) and make bigger monthly mortgage payments .
Plus, it can be dangerous to be so highly leveraged .
But in an expensive housing market, it can be the only way to afford a home.
Doug Duncan, chief economist of the Mortgage Bankers Association of America says, Most banks offer special mortgages to low- and moderate-income borrowers because the Community Reinvestment Act requires financial institutions to provide a certain share of business to these economic groups .
But no- and low-down options for jumbo loans (higher than $300,700) are harder to find.
The costs of the higher interest rate from the 80-20 mortgage are sometimes off-set because there is no mortgage insurance built into the loan .
the State of California only requires mortgage insurance for all home loans exceeding 80% loan to value or LTV .
An 80-20 loan allows the home-owner to step aside the insurance requirement, thus having a lower monthly payment.
If your goal of an 80-20 loan is to have a lower monthly mortgage payment, another option is the T.A.M.I .
program .
the T.A.M.I .
program includes mortgage insurance where as the 80-20 program doesn’t require mortgage insurance .
Robin M .
Root; a senior level loan officer says the T.A.M.I .
provides lender-based mortgage insurance in exchange for a slightly higher interest rate .
Since the IRS, allows a deduction for all interest paid for home loans, the cost of the mortgage insurance is tax deductible .
And, unlike the 80-20 loan program, when the buyer has equity built up, the homeowner has the flexibility to open a home-equity loan for home improvements or cash emergencies.
Using A Second Mortgage For An 80 20 No Money Down Home Purchase Loan
![Using A Second Mortgage For An 80 20 No Money Down Home Purchase Loan]()
Reviewed by Henda Yesti
on
June 28, 2018
Rating:
No comments: