MortgagesUndressed

Piggy back loans.

How piggyback loans work
Piggyback loans are the new-wave method of dealing with a down payment of less than 20 percent. When you use a piggyback, you get two home loans: a primary loan for 80 percent of the house’s value and a second mortgage for the rest of the money you need. With a 5 percent down payment, you would get what’s called an 80-15-5 mortgage: an 80 percent loan, a 15 percent piggyback and the 5 percent down payment. Getting a piggyback eliminates the need for mortgage insurance.

The piggyback can be either a fixed-rate home equity loan or a variable-rate home equity line of credit. The piggyback has a higher rate than the first mortgage.

The combined payments on a piggyback mortgage are a bit less than the payment on a single loan with monthly mortgage insurance premiums. For years, piggybacks had a big advantage because the mortgage interest on both loans was tax-deductible, while mortgage insurance payments were not. Now that has changed, with caveats.

Don’t condemn a 50 year loan. Most people refinance, or sell within 7 years. If it makes the payment easier, it is worth it.

Why this photo? Because I like it.

OK class,

go to Teresa Boardmans site and learn about interest only mortgages. Click here and learn

Interest Only is driving some people into problems and some have done fine. Good or Bad? It all depends.

You can pay a higher interest rate and use a stated income.