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Nics
Guest
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 Posted: Mon Oct 03, 2005 11:07 pm Post subject: Just wanted to know about 80-10-10 Loans |
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Can you educate me about this loan????
Nics |
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 Samantha
Community Mentor
Joined: 16 Sep 2005
Posts: 1602
Location: MASSACHUSETTS
149.70 Dollars($)
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| Posted: Mon Oct 03, 2005 11:42 pm Post subject: RE: |
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Hi Nics,
Welcome to the Forums.
80-10-10 mortgages involve a first mortgage for 80% of the purchase price of the property, a second mortgage worth 10% of the same price and a 10% down payment on the purchase price. With this kind of home loan, borrowers can avoid paying for private mortgage insurance premiums that is otherwise paid by borrowers till they can build up a home equity of around 20% on conventional loans. These loans can be fixed as well as adjustable rate mortgages and these also have the interest-only payment option.
Thanks,
Samantha |
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Niicss
Joined: 03 Oct 2005
Posts: 2620
Location: New Jersey
409.63 Dollars($)
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| Posted: Tue Oct 04, 2005 12:06 am Post subject: Re |
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| Sometimes this type of loans are also called as piggyback loans, and this type of loan is advantageous as the whole payment is tax deductible. |
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Caron
Moderator
Joined: 19 Jul 2005
Posts: 1562
Location: florida
266.58 Dollars($)
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| Posted: Tue Oct 04, 2005 1:50 am Post subject: RE: |
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Hi Nics
I agree with Niicss. The payments on 80-10-10 loans are indeed tax-deductible. Moreover, in an 80-10-10 mortgage, the interest rate on the second loan is 1%-2% higher than that of first mortgage. This is because in case of default, the second mortgage is paid off after the payment of the first loan thereby making it risky for lenders.
Generally, a FICO score of 680 is required to qualify for the second mortgage and for the first mortgage, a FICO score of 620 is sufficient. These loans are due over 15 years but the payments are amortized over 30 years and this helps to keep the monthly payments low.
These loans often allow for interest only payments during the loan period with the option of balloon payment at the end of the loan period. But if rates are high at this time, then it becomes difficult for borrowers to make such large payments. Under such situations, a borrower has no other way but to either pay off the loan completely or refinance it with another mortgage.
A 80-10-10 loan is cheaper since the mortgage interest is tax-deductible whereas the private mortgage insurance premiums are not. One also has the option to pay off the second mortgage much before the first loan but this will help only when there is no prepayment penalty.
Regards,
Caron. |
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