With the demand for affordable housing increasing, lenders over the years have introduced new financial plans in an attempt of satisfying the needs of homebuyers. One such tool that has been introduced in the financial market is the mortgage combo loan sometimes known as piggyback loan. So what is a combo loan? Basically, a combo loan is comprised of two mortgages, which are used for buying or refinancing a home. The two loans are used on the same property with the first mortgage being used as the first lien.
Obtaining A Mortgage Combo Loan
In most of the transactions, the portion of the first lien on mortgage combo loan is usually between 70 and 80 % of the home’s purchase price. Though most homeowners prefer to get the combo loans from a single lender, as it is much quicker and easier, you can also get the second mortgage loan from another financier.
various types of combo loans available in the market. In open financial markets, it is much easier for borrowers to obtain an 80-20 mortgage combo loan. On the other hand, in tight lending markets, the most common types of combo loans are the 80-10 and the 70-20 loans. Majority of lenders require the first mortgage be a fixed one while the second can be closed end (15 year fixed mortgage ) or a home equity loan .
The main advantage of the mortgage combo loans is that they provide the opportunity to many people to own affordable homes. The loan also provides borrowers an alternative to the traditional mortgage loans. Moreover, by applying for a mortgage combo loan instead of increasing the down payment. you are able to write off a significant amount of money on your annual interest payments. The loan also allows you to get low interest rates, especially on the first mortgage.