What is 80/20 Mortgages?

Introduction of 80/20 Mortgages

80 20 home loans are ideal for persons who have no down payment but desire to have their own home, or even those who do not wish to use their savings for this purpose.  Many companies do not offer 100 percent financing, but with a 80 20 loan, you can have two loans, one covering 80% of the loan and the other one covering what would have been the down payment or 20%.

How it is better than other home loans?

80 20 mortgages are better than other home loans because it doesn’t require any down payment. With other home loan options, you will be required to pay a substantial amount down to secure the loan.  This can be extremely high depending on the value of the home to be purchased. Not only are you required to have this sum upfront, many times you might be required to pay mortgage insurance when the amount borrowed accounts for more than 80 % of the total value of the loan. When you mortgage 80 20, all you need to have saved is the closing costs and fees associated with the purchase, nothing more.

How we can save money with 80/20 Mortgage?

The first and obvious saving with an 80 20 loan is in the down payment.  There is none, no need to spend your savings putting money down on your new home. Instead, have it for a rainy day to cover unexpected expenses.  Secondly, with an 80 20 loan, you will not be required to pay private mortgage insurance (PMI), which while providing risk coverage for the lender can be a real expense for you, the borrower.  There can also be some tax benefit associated with obtaining an 80 20 mortgage, be sure to see whether or not you qualify.

Advantages of 80/20 Mortgage

• Zero down home financing- No need to have lots of cash up front for the down payment.
• No private mortgage insurance payments  because you are not borrowing more than 80% of the loan from one lender.
• Perfect for first time home buyers and newly weds.
• Qualify for this type of loan more easily than a traditional mortgage loan.
• Tax reductions are available on 80/20 mortgages.
• Paying off your 20% loan early can reduce your overall monthly payments.
• Interest rates on an 80/20 mortgage loan can be lower than taking a 100% home mortgage loan.