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With some
creative home financing, lenders are offering competitive rates
and flexible mortgage programs to provide a range of financing
options for new home buyers and current home
owners. One
of these options is a 100% home financing program for buying a
new home or refinancing. This can be an excellent loan program if you are
wanting to buy a
home, but your savings balance is lacking a couple of zeros, or
you are looking for a high loan to value refinance. It
usually works by financing a first and a second mortgage that close
concurrently, or at the same time, when you are buying a home.
The first mortgage would cover 80% of the home price, while a
second mortgage, or a home equity credit line would finance part
or all of the remaining amount.
In home
financing terminology, a piggyback
loan can include an 80-20 loan program, which means
an 80% first mortgage plus a 20% second mortgage, an 80-15-5
loan, which requires a 5% down payment, or an 80-10-10 loan , which
requires a 10% down payment.
With this type
of home financing, there is no mortgage
insurance, which is usually required by the lender when your
loan to value is more than 80%. While providing an opportunity
to buy
or refinance your home with little or no equity, another benefit
is the interest paid on a second mortgage or home equity credit line
can be tax deductible, while the payments you would have made for mortgage
insurance are not deductible. |
