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
Why You Should Opt For Bad Credit Debt Consolidation Mortgage
Bad credit debt consolidation mortgage can be an option worth considering when you have debt spiraling out of control as well as a poor credit history. Most of us only realize how badly in debt we are only when we face the huge pile of unpaid bills with high interest rates and penalties that give us sleepless nights. Instead of tossing and turning, the best thing is to take some constructive action that can pave the way for a better, debt-free future. The future can look bleak especially if you have a credit profile that is not very good.
Tips To Improve Your Credit Profile
It can be bad enough to have a poor credit profile but when you add mounting debts and not sufficient income to repay them, it is time you considered the options available that can get you out of the soup. The first thing you can do is to get a clear picture of just how bad the situation is. You need to write down all income and carefully list your expenses, and then write down the debt you owe, to whom you owe it and how much interest you pay. If you are a home owner, you are in luck, as you can use your home to resolve your financial bind. Second mortgage debt consolidation may be the solution you are seeking. There are many firms that offer debt consolidation loans to people with bad credit. You need to determine the current market value of your property and determine what its equity is.
You can get online and look up a few dependable and reputable firms that offer bad credit debt consolidation mortgage services. You can opt to refinance your home or get a second mortgage or opt for a HELOC (home equity line of credit). The main advantage of consolidation is that you get to make single payment each month and you get lower interest rates. You have to negotiate a deal that works in your favor, giving you affordable EMIs and a longer tenure if desired. You just need to be very cautious as defaulting on payments can result in your losing your home.
It is recommended that you compare rates and terms offered by a few firms that offer such services. Check out if there are any complains registered against the firm with the BBB and read client testimonials if available. Once you have determined which firm is reliable and offers you the better deal you can negotiate a deal that will ensure you get affordable EMIs. When you make payments regularly to debt consolidation mortgage loan company,you will not only be reducing your debt but also be improving your credit profile.
By: Apurva Shree
Understanding Second Mortgages and Home Equity Loans
There are many benefits to buying a house rather than renting. Many people would argue that renting a property essentially creates ‘dead money’, in that the money for all intents and purposes vanishes into thin air.
Contrary to this, those who choose to buy their own home – if all goes well – will see a gradual increase in their property’s equity over a number of years, as a result of them paying their mortgage off month by month. In some cases, the equity can rise rather rapidly if a number of factors combine forces.
If a homeowner is shrewd with their money and pays off more than they are obliged too, then not only does the mortgage decrease, but the amount they are paying on interest should decrease too, assuming interest rates don’t increase. Additionally, if an area experiences an unexpected boom, perhaps due to unforeseen development work in the neighbourhood, then this can see local house prices go through the roof, so to speak.
When both the above factors occur in tandem, then the equity in a home can rise considerably in a relatively short period of time, meaning homeowners can often be sitting on mini goldmines.
Many people choose to unlock the equity in their home rather than opting to profit immediately through selling it on. The most convenient way of doing this is by going down the home remortgage route. The funds raised from this can then be reinvested back into the home, with a new conservatory, patio, garage or kitchen serving to increase the value of the home even more.
Of course, any funds acquired through taking out a second mortgage don’t necessarily have to be invested back in the home – they can be used to buy a new car, consolidate existing loans or even go on holiday. Second mortgages may have a fixed or variable rate of interest and will normally constitute borrowing a lump sum amount. As with a first mortgage, it will need to be paid back over a pre-established period of time.
One alternative to taking out a second mortgage would be to opt for a home equity loan (HEL) instead. Similar to a second mortgage, the funds are secured against the value of the property. However, a home equity loan is perhaps more similar to a credit card in that an approved line of credit is given up to a certain amount of money. Furthermore, it may even come with a credit card so that money can be spent against the credit.
Which option is best really depends on the circumstances. For a remodel or a renovation, then a second mortgage may be the best choice, as it’s easier to have an idea of exactly how much money will be needed. In situations where the actual amount of money required isn’t clear, then a home equity loan may be the answer.
By: Adam Singleton