Avoiding A Downpayment With 80 20 Mortgages

Avoiding a​ Downpayment With 80/20 Mortgages
Getting together enough money for a​ downpayment can be rather difficult for many people these days .​
It often takes many years to​ be able to​ get enough .​
Now,​ though,​ there is​ a​ way that you​ can get the​ finances for your home even without a​ downpayment of​ any kind .​
Here are some tips and information about 80/20 mortgages.
The main reason,​ in​ the​ past,​ for requiring this size of​ a​ downpayment was to​ avoid the​ need for Private Mortgage Insurance .​
This insurance is​ required if​ you​ get a​ mortgage for more than 80% of​ the​ value of​ the​ home .​
It can add a​ couple of​ thousand dollars to​ your annual price (and tens of​ thousands of​ dollars over the​ life of​ the​ mortgage) - depending on​ the​ size of​ the​ house .​
Since most people don't wish to​ pay it,​ or​ are unable to​ pay it,​ it​ only made sense to​ wait until you​ had the​ downpayment in​ hand before they ever bought a​ house .​
Now,​ however,​ many lenders have come up with a​ new arrangement to​ help people buy a​ home that could never otherwise come up with a​ downpayment of​ this size .​
It is​ called an​ 80/20 mortgage .​
There are also mortgages available that use similar numbers,​ such as​ a​ 75/25 mortgage - but the​ idea is​ the​ same - to​ make the​ downpayment unnecessary .​
This type of​ financing is​ commonly referred to​ as​ a​ piggyback loan,​ and it​ enables you​ to​ get financing up to​ 100% of​ the​ value of​ the​ house .​
There are actually two mortgages that you​ are getting with an​ 80/20 mortgage - one for 80% and the​ other for 20% .​
If you​ have some money for a​ downpayment then similar arrangements can be made,​ and it​ will mean a​ smaller mortgage on​ your part .​
The larger downpayment that you​ put on​ the​ table,​ the​ better off you​ will be .​
There are a​ couple of​ options that you​ may have with your second mortgage - the​ one for the​ 20% .​
While the​ first mortgage is​ usually fixed rate,​ the​ second mortgage is​ often a​ home equity line of​ credit (HELOC),​ which usually will be an​ adjustable rate mortgage,​ and it​ is​ often a​ balloon mortgage - payable in​ 15 years .​
Refinancing,​ of​ course,​ is​ usually what most people do when it​ becomes time to​ pay up .​
When you​ get an​ 80/20 mortgage,​ you​ typically will be required to​ come up with the​ closing costs .​
This means you​ will still need to​ come up with about $3,​000 to​ $6,​000 for that event .​
Plus,​ don't forget about any other expenses you​ may have after you​ move in​ .​
This makes it​ necessary,​ in​ most cases,​ to​ make sure that the​ house is​ in​ excellent condition when you​ move in,​ and should require very little work .​
It is​ also possible to​ work out a​ deal with the​ seller and see if​ they might absorb the​ cost of​ closing .​
As with any mortgage,​ be sure to​ shop around for that perfect deal .​
Get several quotes online and compare them carefully - it​ could mean the​ difference in​ thousands of​ dollars over the​ lifetime of​ the​ 80/20 mortgage .​
Look into your credit rating before you​ look around,​ and get it​ in​ good shape for an​ even better interest rate.

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