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| *Loan,banking and credit>>>mortgage loan |
Will my mortgage payment be lower if we do a 80/20 loan instead of a one loan? |
I know we will be avoiding PMI if we do 2 loans, but if the the rate is higher on the second loan is it worth it? no it will not, it might actually be higher. one big loan will have one interest rate. an 80/20 is technically two loans and each as an interest rate. the second loan will have a higher rate than the first. despite the higher cost of the loan it can still be the better option because it helps eliminate private mortgage insurance. the real question here is which cost more? loan payment of one big loan + pmi payment or loan payment 1 + loan payment 2 (no pmi payment) I've always been told never do 2. There are tons of articles out on WHY NOT. Basically if I can't pay off 1 why would I take out 2? I don't know if a lender will will do a 100% loan. If you can do it, you have to calculate how much your payments are with the 1 loan, vs 2 different interest rates. Be sure to calculate in closing costs, fees, etc. I doubt it would be of any benefit to you to do the two loans. If your interest rate is higher on one of them you will pay more.. I would do some serious checking into this before you commit. I did an 80/20 as well. The 20 loan rate was variable monthly - so by the 2nd year I had to refinance. Just keep in mind that the 20 loan will probably need to be replaced somehow in the next few years. It worked out for me because my home property value went up enough but I can easily see how it would be death to some people. Ouch/Beware. 80/20 just means 20% down payment and you're mortgaging 80% of sale price - it's only one loan. It's the 20% DP that helps avoid the PMI, although I got my first mortgage last year with zero down, closing costs added in (103%? mortgage) and no PMI - there are dozens of different types of mortgages out there- find a mortgage broker who has access to several companies with various types of plans You would have to check your actual numbers with an accountant or tax program, but remember that PMI is not tax-deductible and mortgage interest is. So even if the rate is higher on the 2nd loan, you will get a tax break to cover about 25% of it. |
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