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The
Zero Down 80/20 Mortgage
| 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. |
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| 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
Phil Andrews is a mortgage consultant with Mortgage Options Inc.
You can visit his website at http://www.mortgageop.com/Phil.htm/.
Article
Source: http://EzineArticles.com/ | 
