Posted by Nate(DC) on January 08, 2003 at 15:19:26:
Depends:
Do you HAVE 20% down?
Is the marginal cost of borrowing that last 10% (which will be higher rate than your first, that’s for sure) worth it? i.e. Let’s say you have sufficient cash to put down 20% on a $100,000 property. You can do either an 80% first at 7% OR an 80% first and 7% with a 10% second at 9.5%.
Then the question really is, given the opportunity, would you like to borrow $10,000 at 9.5% or not? Does that work for you? If it were me - I probably would. But only you can determine what works for you.
I wouldn’t worry about “having two mortgages”. You also “have more money” to play with, so that can be a GOOD thing. Leverage, properly applied, is nothing to be scared of.
I have been offered a 80/10/10 @ 6% on 80 and Prime + 2% on second mortage to allow 10% Cash down.
If I can swing the 20% down, is there a benefit to go with one over another.
Secondly, If i wanted to take advantage of first time buyer programs with 10% down, is it customary to pay PMI.
My lender says theres no way to avoid PMI without putting 20% down.
As this property is being purchased for investment, any comments would be helpful
Thanks
Re: 2 Mortgage Question? 80/10/10 or 80/20 - Posted by Nate(DC)
Posted by Nate(DC) on January 07, 2003 at 22:41:11:
An 80/10/10 would avoid PMI. The maximum LTV on the FIRST mortgage needs to be @ 80% or less to avoid PMI. Unless the first time buyer loans have to be done as one loan @ 90% LTV and not as an 80/10, you could avoid PMI by doing the 80/10.