View mortgages, no thoughts on what is best at 100% or 80/20 loan?

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View mortgages, no thoughts on what is best at 100% or 80/20 loan? In addition, all thoughts of home buyers?

  1. Reply
    April 29, 2011 at 11:18 pm

    The more money you can put down on a house the better. As to first time buyers….they need to stick to their budget and not try to buy a house like mom and dad have and find themselves in over their heads. The current generation wants it all right now. They don’t understand starting at the bottom with a starter home and working their way up to the dream home. Typically as you get older your wages increase and you can afford a bigger house. They forget to take into consideration that even though they may qualify for this house that things are going to pop up that they may not expect and may make it so they can’t afford the mortgage down the road. For instance, increasing taxes, increasing home owner’s insurance rates, plumbing problems, electrical problems, a new roof every 10 years or so, appliances that break down, water heaters that stop working, wells that stop working, job layoffs, death, pregnancy, illness , etc. IF they can afford the mortgage and put aside money (at least $ 5000-$ 10,000) in case these things happen then they should be ok. But most people don’t and find out the hard way and end up in way over their heads and in foreclosure because they don’t think about those things.

  2. Reply
    Baked n Blended
    April 29, 2011 at 11:57 pm

    By 100% do you mean interest only loans? Those are terrible since you never pay down your principle. If you are in an area where realestate is hot (are there any now?), maybe you can get away with it by turning it over quickly.

    Also, if 100% means you have to pay mortgage insurance, that’s a terrible way to waste your hard earned $ $ . 80/20 always better.

  3. Reply
    April 30, 2011 at 12:25 am

    It depends on a few things inlcuding the amount of the loan. If you are borrowing more than $ 417,000, your loan will be considered Jumbo which generally carries a higher interest rate (0.25% or more) than a standard loan. In this case, an 80/20 loan might work better to avoid paying the higher rate on the entire loan amount. a second mortgage at 20% will carry a higher rate but is usually a 20-year loan while the 80% loan is a 30-year loan if you go with fixed rates. Under this scenario, the 100% loan would cost more even though the rate of the 20% loan could be 1-2 percentage points higher ( for example 8% on the 20% loan and 6.5% on the 80% loan) than than interest rate on the 80% loan.

    Also, a 100% loan will require you to carry PMI or private mortgage insurance, an additional cost. However, it would result in one payment to one bank while a second mortgage might have a different due date and a different bank which for some might be confusing.

    You have to look at the carrying cost of the loan for the amount of time you plan to have it though, you time period may change. I believe if the second loan is under $ 100,000, the interest is tax-deductible as is the interest on the first loan so that is less of an issue.

  4. Reply
    April 30, 2011 at 1:10 am

    If you can afford it, an 80% loan is MUCH better than a 100% loan. If you put up at least 20%, lenders will be scrambling all over themselves for your business. You’ll get a better interest rate, AND you won’t have to may monthly P&I Insurance (which you do have to pay to your mortgage company if you put up less than 20%). Besides, your mortgage payments will be lower just because you’re borrowing less.

  5. Reply
    April 30, 2011 at 1:42 am

    It depends on your circumstances. I did 100% financing for the prperty I have now, and it worked out great for me. I was able to use the extra money to do move in repairs while getting acclimated to the various bills associated with home ownership. I’ve since refinanced and things are still coming along quite well.

  6. Reply
    April 30, 2011 at 2:31 am

    Depends on your individual situation.

    First time buyers can access state and or federal programs that have potentially less downpayment or less interest. I did that on my first home and was pleased. Now it’s easier as they are more readily available at lenders than when I bought my first home.

    With my first home I didn’t have 20% to put down but WHEDA allowed for 2% and a lesser interest rate.

    As to the 100 or 80/20 loan, that’s a bit trickier. The financial institution makes most of it’s money off your loan in the first few years in interest payments. Yes, the less you borrow the less you have to pay back. But, it can be used to your advantage to go for 100%. And, sometimes you can get special rates for getting a 100% loan.

    When my husband and I bought our house, we knew we had the proceeds from my house that we could pay after it closed. We took out a 100% loan on the new house and then 5 months later when the closing on my house occurred we put all that money on the principle. We saved 15 years of payments and tons of money in interest payments because of the one huge bulk payment to the principal.

    Also, if you pay 6.6% in interest on your mortgage, but the money is in an interest bearing vehicle of 8% instead of being spent on your house initially, you’re making money that way too.

    You really need to discuss with a mortgage lender that you trust to figure out what works best for you.

  7. Reply
    April 30, 2011 at 2:48 am

    After you purchase your home, you may be interested in this new program. It works well with a 30 year mortgage. I am currently using a HELOC with a new software program that helps build equity fast, and will payoff my home in less than half the time without refinancing, and without extra payments. It is saving me thousands in interest, and pays off home in less than half the years.

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