Using an 80 20 Mortgage to Avoid Mortgage Insurance
An 80 20 mortgage is also called a zero down loan or no money down loan. It is actually two loans, a regular home mortgage which constitutes 80% of the price of the home and a second mortgage or home equity loan that consists of 20% of the cost of the house. The idea behind this type of loan is avoiding mortgage insurance (PMI) by using the home equity loan as the down payment.
Just about all mortgages require some form of mortgage insurance if you are unable to make a down payment of at least 20 percent. By obtaining a second mortgage or home equity loan for 20 percent of the homes cost you can circumnavigate this requirement by using that second loan as the down payment.
There are variations of this type of mortgage such as an 80-15-5 loan. This means that the borrower got a main mortgage of 80 percent of a home’s purchase price, a piggyback loan for 15 percent, and made a 5-percent down payment. This can be a good option if you have some money for a down payment but not enough to cover the entire 20%.
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 then the interest rate is normally fixed for the entire length of the mortgage. Most fixed second mortgages are a 30 due in 15 which means that the second mortgage is amortized over 30 years, but is due in 15 years. 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. They can also be an interest only loan which could save you hundreds of dollars in mortgage payments every month.
The 80 percent first mortgage can be a fixed-rate (15-year or 30-year), adjustable-rate (usually 5/1, 7/1 or 10/1fixed period ARM) or interest-only loan. Typically, the interest rate on the second mortgage loan is higher than the interest rate of the first loan. But because the borrower doesn’t have to pay mortgage insurance, the overall cost is less than a traditional mortgage even with the higher mortgage interest rate on the second loan.
Plenty of mortgage programs allow borrowers to buy houses with little or no money down, but they usually require private mortgage insurance, or PMI. Getting an 80 20 mortgage can be a good way to avoid the extra cost that PMI will add to your monthly payments.
By: Andrew Bicknell
Using an 80 20 Mortgage to Avoid Mortgage Insurance
An 80 20 mortgage is also called a zero down loan or no money down loan. It is actually two loans, a regular home mortgage which constitutes 80% of the price of the home and a second mortgage or home equity loan that consists of 20% of the cost of the house. The idea behind this type of loan is avoiding mortgage insurance (PMI) by using the home equity loan as the down payment.
Just about all mortgages require some form of mortgage insurance if you are unable to make a down payment of at least 20 percent. By obtaining a second mortgage or home equity loan for 20 percent of the homes cost you can circumnavigate this requirement by using that second loan as the down payment.
There are variations of this type of mortgage such as an 80-15-5 loan. This means that the borrower got a main mortgage of 80 percent of a home’s purchase price, a piggyback loan for 15 percent, and made a 5-percent down payment. This can be a good option if you have some money for a down payment but not enough to cover the entire 20%.
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 then the interest rate is normally fixed for the entire length of the mortgage. Most fixed second mortgages are a 30 due in 15 which means that the second mortgage is amortized over 30 years, but is due in 15 years. 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. They can also be an interest only loan which could save you hundreds of dollars in mortgage payments every month.
The 80 percent first mortgage can be a fixed-rate (15-year or 30-year), adjustable-rate (usually 5/1, 7/1 or 10/1fixed period ARM) or interest-only loan. Typically, the interest rate on the second mortgage loan is higher than the interest rate of the first loan. But because the borrower doesn’t have to pay mortgage insurance, the overall cost is less than a traditional mortgage even with the higher mortgage interest rate on the second loan.
Plenty of mortgage programs allow borrowers to buy houses with little or no money down, but they usually require private mortgage insurance, or PMI. Getting an 80 20 mortgage can be a good way to avoid the extra cost that PMI will add to your monthly payments.
By: Andrew Bicknell
The Facts About Getting A Bad Credit Second Mortgage!
A bad credit second mortgage is a specialist area and it pays to know the facts before you begin looking for advice.
What is a Bad Credit Second Mortgage?
A bad credit second mortgage, also known as an adverse second mortgage, is a loan that is taken out on a property you already have a mortgage on. The reason for undertaking a second mortgage is usually to release some of the equity, in order to help pay other debts, or to raise finance for a particular project. An bad credit second mortgage is the name given to a second mortgage product that is specifically designed for people with an adverse credit history.
Is an adverse credit second mortgage my only choice?
Your choice of finance will depend on your current circumstances and what you need to achieve. If you have a property with an existing mortgage and you only need to raise a certain amount of capital, then you should consider a second mortgage. You can specify the amount you would like the mortgage to be for; it doesn’t have to be for the full value of your property. If you have applied for other loans or mortgages and been rejected because of your credit history, then you should investigate an adverse credit second mortgage to see if it meets your needs.
How will I know if I have an adverse credit history?
The first sign of an adverse credit history is when your application for a loan, credit card, store card or mortgage is rejected. This is usually because the lender has checked your credit rating and decided you are a bad risk for their standard products. If this is the case, you should check your credit report to see if it is accurate and so that you know exactly what position you are in. If you run several credit and store cards and have defaulted on any loan or other payments, then your credit history and rating could be affected. If this is the case, you will need to use specialist products such as a bad credit second mortgage to help resolve your financial problems.
Will it increase my debt?
A bad credit second mortgage should help you to manage your debt, provided you use the loan money to reduce your existing debts and you meet the repayment requirements on your other debts, such as your existing mortgage and your new second mortgage. This loan requires a proportion of your home as security, so it is important that you make the payments.
How can I find out more about adverse credit second mortgages?
Taking out an adverse credit second mortgage is something you should do when you have serious debt problems. For this reason, it is important that you talk to an independent professional adviser, such as a mortgage broker. With expertise in the market, they will be able to assess your current circumstances and recommend a product that will help you to manage your current finances whilst keeping monthly payments to a minimum. They will impress upon you the need to be sensible about your debts and serious about clearing them, but will also be able to help you plan properly so that you can use the capital raised by the bad credit second mortgage to improve your chances of eliminating your adverse history.
By: Elizabeth Grant