80/20 Piggy Back Mortgage
A lot of borrowers have asked me if I thought an 80/20 Piggy Back Mortgage is a good idea. To start with, I’ll tell you that the 100% down plan is always the best idea. That way you don’t have any payments. However, I have a really hard time selling people on that plan. An 80/20 mortgage is the next best thing. What this means is that a 20% down payment was made using a HELOC (Home Equity Line of Credit) and the first mortgage is 80% of the value. With this type of loan, you can get a conventional loan and do away with what is referred to as PMI – private mortgage insurance. That insurance is basically foreclosure insurance that pays the mortgage company in the event they have to foreclose on you. On other loans, mortgage companies make you buy this insurance, which costs you about $75 a month per $100,000 borrowed. So you want to do away with that if you can, and an 80/20 loan will allow you to get out of the PMI. There are other variations an 80/10/10 you put down 10% and the most popular is the 80/15/5, you put only 5% down. In some cases you can buy a house that has a jumbo price tag using conventional conforming interest rates as well as not paying PMI. On my web site I have a comparision calculator that gives you a good idea of the savings you can have on a piggy back versus a loan with PMI or a loan with lender paid PMI. you can access this calculator here Piggy Back Mortgage
posted by William Hobbs @ 2:26 PM
14 Comments:
I live in Maryland but am thinking about buying in West Virginia. When I was recently on a mortgage calculation site, it said that a piggyback loan was best for me when I said the state was MD, but would gave me a PMI instead of a piggyback when I said the state was WV. Do they not give piggybacks in WV? Is there no way to avoid paying PMI if I buy in WV and don't have 20% down?
The West Virginia Banking Commission is all its wisdom has determined that they will protect the wv ublic from 100% mortgages, and will not allow 100% fdinancing or piggyback loans that get a borrower out of paying PMI. Sorry for the borrowers in that state!
Thanks for the response. You say that WV won't allow 100% mortgages, but what if I put 5% or 10% down? Could I then get a 80-15-5 or a 80-10-10 to avoid paying PMI? I was putting things like that in the mortgage calculator but it was still giving me a single mortgage with PMI!
Can you tell me where the calculator is that your using?
Yes, I was using eloan.com. I found others, but this one allowed me to try different scenarios w/o giving them personal information. I didn't want to give personal information out of fear of getting all kinds of junk from them or even getting my credit checked. (My credit is good but I don't want the check to lower my score.) But maybe eloan.com is just a bad site, because, in expaining the option they say is best for you, they count PMI as interest - and I have read in several places that PMI is not tax-deductible interest.
Not a bad site, just not looking out for your interests as a borrower. On the virtual loan officer web site I have a PiggyBack loan comparision calculator. You have to put in some information, but onlybecause I want to stay in touch with you and be your broker. I dont sell, give or barter your information. It stays with me, you may get 1 or 2 emails asking you to validate your email address, Ido not check your credit, indeed, I cant without your permission. Here is the link: http://www.virtual-loan-officer.com/ufrontlo/wmhobbs/pig/pigsign.html. I think you will be pleased, and I hope to be your broker.
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