Mortgages

Many people do not have the down payment for homes. They’re stuck paying a monthly rental fees and can’t save efficiently to afford a down payment. There are loans out there to accommodate those who are unable to pay a down payment.

The 80 20 loan is a home loan that involves two mortgages. One mortgage is for eighty percent of the principle and the other loan is for 20% of the loan. The 20% loan is also known as a piggyback loan.

The 20% interest rate is commonly a little more than the 80% loan. You can even opt for the interest only on the twenty percent loan to lower the monthly fees.

The 80-20 loan also exempts the borrower from having to pay private mortgage lnsurance or PMI. PMI is needed for any loan that’s over 80% of the appraised value of the home. The 80% loan and 20% loan added together is still usually less expensive than a single home loan with the PMI insurance. Also home loan interest can be written off on taxes, but not PMI insurance, so the borrower would also be coming out ahead there. Mortgage companies and lenders set up these loans many different ways.

Because the 20% loan is viewed as an equity line of credit it should be refinanced every 3-5 years. You should compare mortgage lenders to find out the various other techniques that are used to help finance the two mortgages and which is the best choice for you.

80-20 loans can benefit many potential home owners. While it is usually popular with people who do not have the savings for a down payment, it can also benefit those individuals who do have the money, but don’t want to dip into their savings or investments. The only payment that is due up front by the borrower is the closing costs.