80 20 Mortgage Loan: For Those Who Don’t Have The Cash For A Down Payment

Traditionally, a first mortgage requires a down payment. This is to protect the lender’s investment but it also benefits borrowers because the interest rates are lowered. But if you do not have the cash for the down payment, the 80 20 mortgage loan or the piggyback loan is for you.

For this type of no-down payment loan, you get financing from two lenders. One will bankroll 80% of the loan amount while the other will loan you the 20% and that’s 100% financial backing! You get the money for your home plus the mandatory deposit.

Apart from getting financing for the deposit, you are able to sidestep the Private Mortgage Insurance because the property is financed in full. This is part of the appeal of the mortgage. To add to the exciting package, there is no out-of-the-package expense except for the application and closing fees.

Higher Rates

The interest rates for this type of loan is steep but you can haggle with the 80% lender to lower the interest rates a little but the 20% lender won’t budge because there’s little in it for him. But is it is faster to pay-off the second lender and if you do, you build the equity of your home faster. If your credit stays good, you can refinance the two loans into one package in the future. A good mortgage broker can help you do the maths if you are a good candidate for this type of loan.

By: James Will

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