Financing in 19320>Question Details

Kallie, Home Buyer in Verona, WI

Two mortgages instead of one?

Asked by Kallie, Verona, WI Fri Sep 4, 2009

We are putting 10% down on a home with a conventional loan and excellent credit (also first time home buyers if that makes a difference) Our mortgage broker is recommending 2 loans and I'm not sure why. I never really thought of it, but what are some advantages and possible disadvantages?
Thanks for any advice!!

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Hi Kallie-
Did you find someone to help you! I work and live in the 19320 footprint.
Thank You,
Ron Beebe
0 votes Thank Flag Link Mon Nov 16, 2009
Hi, Kallie

Sounds like you're doing what's called a 80/10/10. You're putting 10% down and getting a primary (80%) and secondary (10%) loan to finance the rest. This is done to circumvent the necessity of PMI---Something which is next to impossible to get and very high in this current market. That's the major plus, the major minus is that now you will have to pay 2 separate loan origination/processing and title closing fees, have twice the interests to pay back monthly, and (depending on how the 2nd is structured) paying only interest on that 2nd. Ask your loan officer whether or not they have a LPMI (Lender Paid Mortgage Insurance) or TAMI (Tax Advantage Mortgage Insurance) products you could utilize instead. Although the interest may be a .25 to a .5 pt higher than what you would pay on the first/primary of your 80/10/10, it will do the following:
- Still negate PMI
- Be a single monthly mortgage payment instead of 2
- And will still be a lower monthly payment than your current 80/10/10.
0 votes Thank Flag Link Fri Sep 4, 2009
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