Anyone have advice on 120% Mortgages?

Question

I really want a house, however my family's car loans and insurance are proving prohibitive. We have two cars payments that equal $316/mon. That's not bad but because I'm a new and young driver, our insurance (full coverage because of the loans) is $328/mon, which is more than the cost of our cars! We do have a couple thousand dollars in savings and are stumped with how to use it.

We can use it all to pay off one of the cars, which will save $109 in payments and we can switch that car to PLPD, which would lower the insurance. However, that would still leave us with $207 in car payment plus insurance and no savings. It feels like it would take forever to save up for a house after that!

We wanted to know about 120% or 115% morgages to see if we could roll the car loans into the morgage and then go to PLPD on them to save on the insurance. Then we could use the savings we have as a downpayment on the house.

Thank you in advance for your answers.

Answer 1

Right now, you're probably "upside down" on your cars. That means you owe more on them than what you could sell them for. You are proposing getting upside down on a much bigger scale... that's moving backwards financially, not forwards. Do not do it.

Sell the cars even at a loss and don't get a loan for more than 100% (even that's stretching it). You can then buy lesser cars (preferably cash) and then your payments and insurance won't be eating you out of house and home...literally.

Even if this takes time, it is worth it. Keep your credit clean - make payments on time and stop overstretching yourself. At the minimum, save up your own closing costs and prepaids. If you do get an 80/20 loan (two loans, equaling 100% of the sales price), make extra payments to the 20% part and pay it off early. DO NOT BUY EXPENSIVE CARS AFTER MOVING IN AND KILL THIS OPTION. Also, don't go out and buy all the appliances on credit and sink yourself into more debt. Go look in the newspaper and buy used fridge, washer, dryer with cash as you can. Don't fall for the "24 months same as cash" scams. They know that you're over extending yourself, and the interest will get on there when you don't pay it off by 24 months.

Good luck with your first home.

Answer 2

Hang in there a while and wait. House prices will fall some more. Pay off your cars and save money. Your time will come. Try to stay away from 120% loans! Bad to owe more than something is worth.

Answer 3

Any loan amount over 80% is a hard money loan.......self explanatory.