Combination Mortgage Loans

An increasingly attractive mortgage option is what is referred to as the combination loan or jazz band loan. Combination loans have got respective key advantages over traditional 30-year mortgage loans and there are a broad assortment of combinations to lawsuit most fiscal situations.

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 places value, and the 2nd loan is for the remaining 20%. With the 80/20 mortgage loan, the purchaser pays no down payment and is ideal for those without a important amount of savings. Another cardinal advantage of the 80/20 mortgage loan is that the purchaser avoids PMI or private mortgage insurance. PMI is required on all mortgage loans that are greater than 80% of the places value. A 3rd advantage of the combination mortgage loans is that both loans are taxation deductible. By avoiding PMI and increasing their taxation deduction, a purchaser additions a important cost nest egg advantage over traditional mortgage loans.

Combination loans are available in many other ratios as well. The 70/30 mortgage loan is usually preferable to the 80/20 loan for more than expensive homes, when 80% of the places value would be classified as a elephantine loan (above the FNMA/FHLMC limit) and subject to higher involvement rates.

Another option is the 80/15/5 mortgage loan, where the purchasers do a down payment of 5%. Other options include the 80/10/10, 75/15/10, etc which are all discrepancies of the same.

In combinations mortgage loans, the primary loan usually have got a 30-year amortization term, while the 2nd loan can have 30 or 15 twelvemonth term. Expect the involvement charge per unit to be about 2% higher for the 2nd loan. The purchaser can choose for a fixed charge per unit mortgage or an arm (adjustable charge per unit mortgage) on either or both loans. The arm will have got a less monthly insurance premium and let for further cost savings, but be certain to refinance the arm loans if involvement rates begin to rise.