Avoid Over Priced Jumbo Mortgage Through a Piggyback
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A jumbo mortgage is any mortgage over loan limits that are considered average. Different lending institutions will consider different purchase amounts in a jumbo mortgage, but in general a jumbo mortgage is anywhere between $700,000 and above. Jumbo mortgages are often found in expensive real estate markets and carry with them their own concerns. Many jumbo mortgages were previously forced into adjustable rate mortgages because they would be otherwise too expensive. Because jumbo mortgages usually take place in strong real estate markets they were previously the target of very risky investments that ultimately could leave homeowners in difficult financial situations. Jumbo mortgages are usually treated differently than conventional mortgage packages and can be more difficult to refinance, foreclose, and short sell.
What Is A Piggyback Mortgage?
A piggyback mortgage is a mortgage that rides on top of another mortgage product. This has been traditionally done either during jumbo mortgage loans or during loans in which the consumer could not afford the deposit. A piggyback mortgage allows a mortgage borrower to make multiple loans against the same property. Often, the smaller of these loans will be at a larger interest rate than the more substantial loan in order to mitigate risk. Only certain lending institutions allow or provide piggyback mortgages and this industry has become highly regulated after the effects of the real estate crash. It may be necessary to consult a real estate or mortgage professional if considering a piggyback mortgage loan.
What Are Problems With Jumbo Mortgages?
Jumbo mortgages can be far more difficult to deal with than traditional mortgage loans. Because of the nature of jumbo mortgages, many lending institutions that offer them offer adjustable rate mortgages. These mortgages may start off with a low rate, but will later increase in rate later. These rate increases may be so substantial that some owners may lose their properties. Because many jumbo mortgage lenders are private lending institutions, many
of them will not allow things such as short sales in order to get out of properties the owner is underwater in. This means that many owners may be forced to foreclosure despite having other options. Jumbo mortgages are also extremely hard to refinance, which means that when the real estate market is doing better it's impossible to get a better rate on your mortgage.
How Do Piggyback Mortgages Help?
Piggyback mortgages allow a prospective homeowner to secure multiple, smaller loans which will not constitute multiple mortgages. While these mortgages will both need to be paid back, they will be more flexible and easily handled. This means an owner may be able to manage a conventional mortgage loan while also dealing with the piggyback mortgage loan. A piggyback mortgage essentially allows a prospective homeowner to gain the benefits of a conventional loan while purchasing a property that would otherwise necessitate a jumbo loan. In this economy in particular this can be an extremely valuable asset.
How Can You Get A Piggyback Mortgage?
Only certain lending institutions allow piggyback mortgages today, and the number of these lending institutions has drastically reduced since the real estate crash. Locating a company that allows piggyback mortgages may take some time and research, but once the appropriate company is found they will work with you to achieve the best possible financial goal. The piggyback mortgage process is usually very similar to the process of a traditional mortgage, and truly only requires that the borrower meet the requirements which can sometimes be stringent. Those with extremely good credit or preexisting assets are far more likely to be able to receive a piggyback loan than those who have bad credit. Proven real estate investors are also more likely to receive a piggyback loan than first-time homeowners.
Brentt Taylor writes issues related to the housing market and financial matters. He started writing for MortgageLoan.com in 2010. The site is owned by MortgageLoan Directories and Information LLC. The site has been providing news and articles since 1995.