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Message
80/10/10 Mortgage Loan
Posted on 4/19/21 at 5:35 pm
Posted on 4/19/21 at 5:35 pm
Anyone familiar with 80/10/10 or piggyback mortgage loans?
Was planning on doing 20%, but am unable to liquidate the other 10% until a few weeks after my close date (I'm dumb, I know). I am planning to pay off the second loan (10%) as soon as I can liquidate the funds to avoid any interest on it.
It seems like it would be very advantageous to do a 80/10/10 instead of just doing 10% down and paying PMI.
There's got to be something I'm missing here. Right?
Was planning on doing 20%, but am unable to liquidate the other 10% until a few weeks after my close date (I'm dumb, I know). I am planning to pay off the second loan (10%) as soon as I can liquidate the funds to avoid any interest on it.
It seems like it would be very advantageous to do a 80/10/10 instead of just doing 10% down and paying PMI.
There's got to be something I'm missing here. Right?
12
Posted on 4/19/21 at 5:48 pm to Lazy But Talented
Sounds insane
Just put 5% down Conv
Mi rate is nothing if you have good credit
Just put 5% down Conv
Mi rate is nothing if you have good credit
Posted on 4/19/21 at 5:49 pm to Lazy But Talented
I’m not sure if there is any extra closing costs included for the extra loan, but if there is, you could to conventional with PMI, drop your lump sum on it in a couple weeks, and call to have PMI dropped if you’re at 80% LTV.
Posted on 4/19/21 at 5:50 pm to Lazy But Talented
If you are about to get the other 10% I’d just pay the PMI for a few months. If I recall when I did 80/10/10 there were two closing costs but that was 25 years ago.
I didn’t those loans were still a thing.
I didn’t those loans were still a thing.
Posted on 4/19/21 at 5:51 pm to slackster
quote:
drop your lump sum on it in a couple weeks, and call to have PMI dropped if you’re at 80% LTV.
That was my thought as well, but when I mentioned this the loan officer told me that we would be locked into paying PMI for 2 years regardless of when we get to 80% LTV. Doesn't really make sense to me, but what do I know. I'll have to talk to him a bit more about.
This post was edited on 4/19/21 at 5:52 pm
Posted on 4/19/21 at 6:00 pm to Lazy But Talented
quote:
That was my thought as well, but when I mentioned this the loan officer told me that we would be locked into paying PMI for 2 years regardless of when we get to 80% LTV. Doesn't really make sense to me, but what do I know. I'll have to talk to him a bit more about.
I think the two year rule is for Fannie/Freddie loans only, but I guess that’s the majority of conventional mortgages anyway.
Posted on 4/19/21 at 6:19 pm to slackster
I just read some of the Homeowner Protection Act and it states that The servicer must terminate PMI when the principal balance of the mortgage is first scheduled to reach 78%.
How would those type of loans be able to workaround this and require 2 years of PMI?
ETA: realizing if we changed to the 80/10/10 unlikely it’ll get done in enough time to make the closing date. So won’t be an option.
How would those type of loans be able to workaround this and require 2 years of PMI?
ETA: realizing if we changed to the 80/10/10 unlikely it’ll get done in enough time to make the closing date. So won’t be an option.
This post was edited on 4/19/21 at 7:03 pm
Posted on 4/19/21 at 8:03 pm to Lazy But Talented
You can’t borrow from a 401k or something? That would only cost you $100 and you could have the money this week?
Posted on 4/19/21 at 8:27 pm to Lazy But Talented
Do an 80/10/10 with your 2nd lien position as a HELOC.
You pay it off when the funds are available but you can borrow it back for emergencies or as needed.
Getting rid of PMI sends the file to an underwriter and often requires a small processing fee ($200 or so). And as has been mentioned, it wont be 20% equity to remove PMI.
Helocs generally have no closing costs too. Especially if you draw at the time the account is opened.
You pay it off when the funds are available but you can borrow it back for emergencies or as needed.
Getting rid of PMI sends the file to an underwriter and often requires a small processing fee ($200 or so). And as has been mentioned, it wont be 20% equity to remove PMI.
Helocs generally have no closing costs too. Especially if you draw at the time the account is opened.
Posted on 4/19/21 at 8:27 pm to Lazy But Talented
80/10/10 loan is your best option, but make sure it is a heloc and not a second perm loan. If you put 20% down, it would be hard to find a bank to give you a heloc after. This way you get it at the beginning. Pay it off soon after, then you have the option to draw down later if there is an emergency.
Posted on 4/20/21 at 7:36 am to Lazy But Talented
15 year fixed rate with a monthly payment no more than 25% your take home monthly pay
Posted on 4/20/21 at 8:02 am to Lazy But Talented
quote:
Was planning on doing 20%, but am unable to liquidate the other 10% until a few weeks after my close date (I'm dumb, I know). I am planning to pay off the second loan (10%) as soon as I can liquidate the funds to avoid any interest on it.
Any chance you can get the seller to agree to push back closing?
Could you just get a short term loan, collateralized by whatever you are liquidating?
Posted on 4/20/21 at 8:12 am to LSU1018
401k loans are ideal for this type of scenario
Posted on 4/20/21 at 9:00 am to LSUFanHouston
quote:
Any chance you can get the seller to agree to push back closing?
I don't believe they are willing to move it. The blackout period to trade doesn't end until late May and current close date is first week of May. Really thought there would be some type of exception for this, but there is none at all.
Loan officer is checking on a couple things for us. I'm in a situation where last resort would be to accept a gift to cover the remaining 10%, but was really trying to avoid this route.
Thanks for all the input guys.
This post was edited on 4/20/21 at 9:03 am
Posted on 4/20/21 at 10:00 am to Lazy But Talented
quote:
I just read some of the Homeowner Protection Act and it states that The servicer must terminate PMI when the principal balance of the mortgage is first scheduled to reach 78%.
Wonder how much mortgage companies actually pay attention to this, or do they believe it's worth the risk that most borrowers are unaware of the Act. My old mortgage company told me that I would not be able to have it automatically removed until it was below 70% and if I request an appraisal it would need to be below 75%.
Posted on 4/20/21 at 10:01 am to meansonny
quote:
Do an 80/10/10 with your 2nd lien position as a HELOC.
So tie yourself to prime rate adjustable at like 4% + vs an MI calculation of .25%
Lol this board
Posted on 4/20/21 at 10:26 am to SDVTiger
quote:
So tie yourself to prime rate adjustable at like 4% + vs an MI calculation of .25%
Lol this board
There is no rate when it is paid off.
It is a 4% credit card available whenever a large purchase is needed (or emergency fund).
4% of 0 balance is $0.
If he ever needed to dip into equity in his home again, a refinance would cost $3k to $6k.
And the HELOC is free (shouldnt be any closing cost). The trick is qualifying in underwriting at a combined loan to value at 90%. Not every lender wants to be hanging in a 2nd lien position that high.
Posted on 4/20/21 at 10:31 am to Weekend Warrior79
quote:
quote:
I just read some of the Homeowner Protection Act and it states that The servicer must terminate PMI when the principal balance of the mortgage is first scheduled to reach 78%.
Wonder how much mortgage companies actually pay attention to this, or do they believe it's worth the risk that most borrowers are unaware of the Act. My old mortgage company told me that I would not be able to have it automatically removed until it was below 70% and if I request an appraisal it would need to be below 75%.
Im not familiar with the homeowner protection act.
What borrowers dont realize is that the mortgages are insured/guaranteed down to 70-75%. The cost of that guarantee is so low that a PMI installment would cost more to manage and remove than to charge premium at 80%. Originators and service companies are willing to bake that risk into their costs.
Daily pricing sheets on loans often give this benefit for low loan to value.
Posted on 4/20/21 at 10:38 am to meansonny
quote:
There is no rate when it is paid off.
When is the key word
Until that happens you are paying way more and when it adjusts 1% and then again lol
Posted on 4/20/21 at 10:42 am to SDVTiger
quote:
When is the key word
Until that happens you are paying way more and when it adjusts 1% and then again lol
You probably dont realize that mortgage pricing a first mortgage at 90% loan to value is worse than mortgage pricing at 80% with a 10% second.
You are going to have him paying a higher mortgage rate for the life of the loan (or thousands of dollars in points to buy the rate back down) AND he will have to pay the balance down below 78%LTV, pay a conversion fee, and possibly a 2nd appraisal.
The goal of a first mortgage is to get the best terms on the first mortgage (large balance that he probably wont be able to refinance into a better position in this lifetime).
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