80/20 Combination Financing           

                                                                                             
80/20 loans are also described as combination financing or piggyback loans and offer a convenient way to  provide creative financing in a purchase, refinance, home improvement, or debt consolidation transaction. In a purchase transaction, a second trust is frequently used in combination with a first trust to avoid paying Private Mortgage Insurance or PMI. The first trust is always set at 80% of your purchase price which eliminates the need for PMI. We add a second trust of 20% of the purchase price or value. There are actually two versions of this program offered by several lenders. The first will require you to have 3% cash in the transaction (covering your closing costs) and the second requires no cash at all. I have had many clients close there transaction with no cash by having the seller pay all of their closing costs. Several programs will now allow combined loan amounts up to $500,000 and again, NO Mortgage Insurance!

You have a wide range of mortgage options on this loan, including fixed rate or arms. Also, interest only products are often available as well. Several advantages to consumers using this approach include:

Your entire payment is tax deductible (mortgage insurance is not)

You may decide to pay off your second early reducing your total payment.
 

However, there are some potential problems with the strategy.

Your second trust may include a prepayment penalty - Our programs do not

Depending on the rate on your second your total payment may actually be more. Send me an email with your anticipated sales price and I will be happy to run Good Faith Estimates comparing both approaches for you.
 

Second Trust Ratios
A second mortgage or second trust is a loan secured by your property which takes second position to the first mortgage. A second trust carries a fixed interest rate for the life of the loan and amortization periods range from 5 to 20 years with a great new product amortized over 30 years with a balloon due in 15 years. The longer amortization period lowers your monthly payment significantly. Generally, your total debt ratio should not exceed 45% of your monthly pretax income.  Depending on credit scores, an interest only HELOC may also be available to you as well

I have included a page on how to calculate your qualification ratios.

I have included a page on documentation requirements.   

We offer you the ability to qualify and close into several unique programs which accommodate borrowers with non traditional income or asset situations. Please visit my No Docs page for additional information on a Stated Income Second Trust.

Many of my clients are converting from fully amortizing payments to an interest only approach with a significantly lower monthly payment. I have some extensive information available. Read more to see if this powerful tool could work for you.