The Zero Down 80/20 Mortgage
by:
Matthew Allen
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 www.realmortgageadvice.com
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