When getting a mortgage you will want to know all your options? And of course you want to make sure you are choosing the best mortgage for your needs. Many times I hear that other banks do not offer 2nd mortgages or that they do not exist. I am here to say they do exist and to explain when getting a 2nd mortgage could be best for you.
A jumbo loan is considered any conventional loan with a loan amount over $417k. So what do you do if you loan amount is over $417k? You could get a Jumbo mortgage, but the rate for a Jumbo Mortgage is usually .75% to 1% higher then a normal loan. But if your total loan amount is small enough you can split the loan into 2 loans. You can keep the first loan at $417k and get a 2nd mortgage for the difference. As an example, you have a $500,000 loan. Your rate could be 6% on a Jumbo loan. Or your could do 2 loans, one at $417k and a 2nd mortgage of $83k with a rate of 7.5%. The option of 2 mortgages would save you about $180 a month.
Waiving your Escrow account
Waiving your escrow account means to not include your taxes and insurance in your payment. The only way to do this is to put a down payment of 20% or have 20%+ equity in your home if you are refinancing. Or you could use a 2nd mortgage to make up that 20%. As an example, your home is worth $200k and you need a new loan of $190k. based on this you would need to include your taxes and insurance in your payment. Or.... You could do a first mortgage of $160,000(80%) and a second mortgage of $30,000. This would allow you to not include your taxes and insurance in your payment
Mortgage Insurance is Not Tax Deductible for You
If you make over $109,000 a year, mortgage insurance is not tax deductible for you. But if you get a conventional loan for more then 80% loan to value(less then 20% down payment), you will have it. Unless you get two loans. Another example, you only want to put a 5% down payment. So you would want to do a first mortgage for 80% of the sales price and a second mortgage for 15% of the sales price.
A Lower Payment
Some times getting a 2nd mortgage will allow you to get a lower payment. Just like our example under "Jumbo Loans". But you can also save on your monthly payment if you are not getting a Jumbo loan. Let's say you are buying a home of $200k with a 5% down payment. If you chose to get one loan with mortgage insurance your payment would be about $88 higher then a mortgage option of two loans.
Keep in mind 2nd mortgages are not for everyone. You have to have great credit(680+). They expect you to have money in the bank for reserves and there may be other requirements. A rate on a 2nd mortgage can be from 6.99% to 9%. And the min loan amount is $10k to a max of $100k(sometimes higher). Our home is our biggest asset, make sure you are getting the best mortgage for that home. Whether you are buying a new home or refinancing that home, call me today to make sure you are getting the best mortgage possible.