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.
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
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 http://www.realmortgageadvice.com.
MORE RESOURCES updated Sat. May / 26 / 2018
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