About Combination Mortgage Loans
An increasingly attractive mortgage option is what is referred to as the combination loan or combo loan. Combination loans have several key advantages over traditional 30-year mortgage loans and there are a wide variety of combinations to suit most financial situations. http://attackonamericain2001.com/obhmy365.htm
By far, the most popular combination mortgage loan is the 80/20 loan. This loan is actually two loans. The first loan is for 80% of the homes value, and the second loan is for the remaining 20%. With the 80/20 mortgage loan the buyer pays no down payment and is ideal for those without a significant amount of savings. Another key advantage of the 80/20 mortgage loan is that the buyer avoids PMI or private mortgage insurance.
PMI is required on all mortgage loans that are greater than 80% of the homes value. A third advantage of the combination mortgage loans is that both loans are tax deductible. By avoiding PMI and increasing their tax deduction, a buyer gains a significant cost savings advantage over traditional mortgage loans.
Combination loans are available in many other ratios as well. The 70/30 mortgage loan is usually preferred over the 80/20 loan for more expensive homes, when 80% of the homes value would be classified as a jumbo loan. Above the FNMA and FHLMC limit and subject to higher interest rates. Another option is the 80/15/5 mortgage loan, where the buyers makes a down payment of 5%. Still other options include the 80/10/10, 75/15/10, etc which are all variants of the same. http://homeincomeportal.com/obhmy365/fp12.htm
In combinations mortgage loans, the primary loan usually has a 30-year amortization term, while the second loan can have 30 or 15 year term. Expect the interest rate to be about 2% higher for the second loan. The buyer can opt for a fixed rate mortgage or an ARM adjustable rate mortgage on either or both loans. The ARM will have a lower monthly premium and allow for additional cost savings, but be sure to refinance the ARM loans if interest rates start to rise.
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