80/20 loan?

Question

dear all:

In the process of buying my first place. A mortgage officer (nonprime lending) offered me a 80/20 loan. What are the pro's and con's and how easy is it to refinance later?

Thank you!!

Answer 1

Depending upon the value later it's easy if you DO NOT have a prepayment penalty. Do not accept a prepayment penalty.

There is nothing wrong with the 80/20 financing strategy.

Just be sure that you can afford the payments. Easily! Not with a struggle you can afford them. Easily afford them. Then you are all set to be a homeowner. Too many people buy at the tip top of their buying ability and then struggle to afford themselves.

Best of luck

Answer 2

80/20 loans are good in two was:

One you get a lower interest rate on the first then you would get on if it was one loan for 100%.

Two you do not have to pay any private mortgage insurance(PMI).

You should have no prob to refinance as long as you have some principal reduction and the value of the has home increased.

I would focus on paying down that second mortgage as much as you can in the mean time.

Good luck, need any more info let me know...

Answer 3

It really doesnt change anything when it comes to refinancing an 80/20. The biggest thing that will affect an refi is the appraisal. typically the biggest pro to the 80/20 is not having to pay mortgage insurance, which will save you from $80 to $300 per month depending on the loan amount.

Answer 4

As long as you can afford the payments, they are the best loans if you don't have 20% down. Your 20% portion of the loan will be at a higher interest rate (one of my properties it's 13%) but it is tax deductible. PMI is NOT deductible. Also, you will not have a problem refinancing later on. Good luck.