Can I refinance a 80/20 with my parents taking a second mortgage on their property?

Asked by Waterboy, 03051 Wed Dec 28, 2011

I owe 237k on an fha loan @ 6% .I want to borrow 60 k for 10 yrs @ 4% and the residual 190k will be refinanced @ 4.125. I dont qualify for HARP because its an fha loan. The streamline rates arent worth it also.Will the second mortgage be tax deductible on my behalf and can they still require pmi since im borrowing 20% from family??? If my parents put my name on their deed can i get the loan on my own??? Yes i am borrowing extra money to add square footage/master bedroom addition.

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Scott McCauley’s answer
Scott McCaul…, Other Pro, Portsmouth, NH
Thu Dec 29, 2011
80/20's are very hard to come by these days. Sounds like a FHA 203K Loan might be something good to check into. It is also called a Renovation Loan. But don't let that term scare you! The renovation portion can be almost anything- from new windows or kitchen appliances, to additions or even a complete renovation from the foundation up. From a few thousand to many thousands and then some!

It's a great product where it takes into account what the value of your home will be AFTER the work has been completed. So in this case you would refinance what you owe, plus the costs to do the renovations, and that would be compared to what the value of your home would be after the work. Often times, you are creating equity that you did not have before.

Not every lender does these, and many do them poorly! My company has a deicated 203K division that makes borrowers(and other parties involved) very comfortable with the transaction and process. Please feel free to contact me for more info.

Scott McCauley
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Scott Godzyk, Agent, Manchester, NH
Thu Dec 29, 2011
There is no such thing as an 80/20 loan any more. That is what got a great deal of these buyers into foreclosure. if you get a new loan and your equity level is at 20% than you would not have to pay PMI, the bank giving you teh new loan would want to see where the money to pay off teh 20% is coming from. You would want to be prequailified to find out the answers to all your financing questions
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No Name, , Nashua, NH
Wed Dec 28, 2011
If your original loan is an FHA loan then chances are you do not have 80% equity. If your goal is to add square footage a better alternative for you would be the FHA 203k loan. The rates are still very competitive. The other issue is that second mortgages are tough to obtain and just because your parents add you onto the deeds does not mean that a lender would lend a second mortgage. Also if your parents were to take out a second mortgage and then lend you the money you would need to contact a CPAto find out if and how that money could/might be tax deductible.

If you have further questions I am local 603-396-9176 please give me a call.
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Annette Levi…, , New York, NY
Wed Dec 28, 2011
Waterboy, If you are refinancing and paying down the mortgage, you have to show where the money is coming from. No one allows 80/20. You should consider a 203K which will give you the money for the work you want to do.
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Fred Glick, Agent, Mountain View, CA
Wed Dec 28, 2011
As long as you qualify with enough income and good enough credit, you can get a new loan at the 80% loan to value.

Since your parents are giving you the rest of the money, all should be good.

The best idea is to talk with a qualified mortgage broker.

If you need a name, email me and I will send you a name of a person that is really good.

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