Long gone are the days in which a 20% down payment is the only way to purchase a home. New purchasing options are popping up every day, and oldie but goodies, such as Piggyback loans, are standing the test of time. These loans are a great option for the disciplined buyer. Here’s why.
Piggyback loans are ideal if a buyer does not have a 20% down payment to purchase a home. As long as a borrower has 5% to 15% to put down, they can purchase a home with two loans. The first loan is the traditional mortgage with an 80% LTV ratio. The second, piggyback lien, is a home equity loan with a revolving line of credit. The benefit? The borrower doesn’t have to pay private mortgage insurance. What’s more is these loans have a 10-year-period in which only interest payments are due. After that, the principal is amortized for up to 20 years and the payment is updated accordingly.
Another reason to opt for a piggyback loan is to avoid going over the conforming loan limit. Mortgage amounts over this limit tend to carry higher interest rates. These are known as jumbo loans. The 2018 conforming limit is $453,100 in most of the United States.
To find out if a piggyback loan is right for you, call us today at 949-356-6400 to discuss your options.