Q:

What is an 80/20 mortgage loan?

A:

Technically, an 80/20 mortgage loan is two loans. The first loan is for 80 percent of the mortgage, and the second loan is for the remaining 20 percent of the price of a home. An 80/20 mortgage loan can allow a home buyer to save money at the beginning of the loan term as well as throughout its term.

When a home buyer enters into an 80/20 mortgage loan, he is required to make two monthly mortgage payments. Those who already have 20 percent to put down on a mortgage might not find an 80/20 loan advantageous. Typically an 80/20 loan works out best for those who do not have 20 percent to put down on a loan and would be required to pay private mortgage insurance. This insurance is required by lenders so they can recoup the loss for any homeowners who default on their payments.

Many see 80/20 loans as being riskier than traditional mortgage loans, so lenders require borrowers to have a higher credit score than an 80 percent loan traditionally requires. Because the 20 percent loans often require a variable interest rate instead of fixed rates, the amount that borrowers pay each month tends to vary.


Is this answer helpful?

Similar Questions

  • Q:

    Can you get a mortgage loan with a 520 credit score?

    A:

    According to Broker Outpost, a person can get a mortgage loan with a 520 credit score. Mortgage brokers work face-to-face with the poor credit holder and the lender to sort through credit issues so the credit holder can receive a mortgage loan.

    Full Answer >
    Filed Under:
  • Q:

    What is a mortgage?

    A:

    A mortgage is essentially a loan, usually given by a bank, to provide individuals and families with funding to secure housing. Mortgages fall into the larger category of financial loans, but are specifically designed for real estate. Mortgages contain several different components, which include collateral, principal, taxes and insurance.

    Full Answer >
    Filed Under:
  • Q:

    What is a mortgage glossary?

    A:

    A mortgage glossary is a list of terms that are commonly used to help people when they are buying and managing real estate. The world of finance is full of specialized terms, so it can be helpful for those looking to get a mortgage to have a working knowledge of how a loan works.

    Full Answer >
    Filed Under:
  • Q:

    What is a signature loan?

    A:

    According to Investopedia, a signature loan is a personal loan that does not require collateral to secure, typically issued by a bank or other financial institution. The loan is issued based on the customer's signature on the loan papers and his word that the loan is to be repaid. Because the loan is unsecured, it is also sometimes called a character loan or good faith loan.

    Full Answer >
    Filed Under:

Explore