The 80/20 way

An excellent mortgage option for those who cannot afford to pay down payments required for other mortgage options, may follow the eighty-twenty way.

What is the eighty-twenty way?

The eighty-twenty way of getting a mortgage is simply getting two mortgages or loans for hundred percent of the purchase price. What essentially this means is that you break up the hundred percent equity worth of your property or home that you want financed and then apply for eighty percent of that as a first mortgage of the purchase with a second mortgage of twenty percent of the purchase price. If you have burrowed the loan amount from non sub prime lenders, then going the eighty-twenty way, may save you from having to pay for the mortgage insurance. Mortgage insurance may be always necessary for people who may not be able to provide the twenty percent down payment to waive off the mortgage insurance. Thus, you may avoid the mortgage insurance and still be able have the entire hundred percent finance option, available to you, if you follow the eighty twenty way. For those of us, who may borrow from sub prime loan lenders, you may be able to bring down the interest rates that they charge on the money borrowed. You may be able bring your interest rates by at least ½% to 3% lower, as compared to sub priming a hundred percent loan from these lenders. A hundred percent loan is simply a complete financing of your home from a sub prime lender at extremely high interest rates. There also exists more choices that you may opt for, if you may go the eighty twenty way.

These choices are mostly applicable to the twenty percent of the eighty twenty loan. The second loan may either be a line of credit or it may be a fixed second mortgage. If you do opt for a second mortgage on the twenty percent of the entire hundred percent loans, then the interest rate will be fixed for entire term of the loan. Most of the second fixed mortgages offered out there are a thirty due in fifteen. This may mean that the loan may amortize over thirty years, but it may be due within or in fifteen years. This essentially means that the second mortgage of twenty percent is basically a balloon mortgage. You may worry yourselves, since it is statistically proven fact that people do refinance or sell their homes with eight to ten years any ways. If you opt for a line of credit as your twenty percent mortgage then in this case, the interest rates may very well fluctuate, depending upon the prime bank rates set by the federal reserve. It may go up or down depending on the prime rates. One common benefit that you may achieve, while opting for a line of credit as your twenty percent of the mortgage, is that the interest rates as compared to the fixed mortgage of twenty percent, is much lower and this works in your favor.

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