Piggyback mortgage loans and rates are things of the past and what that means to you
Piggyback mortgage has served as good alternative to one loan with private mortgage insurance for borrowers who can't afford a 20 percent down payment. Before the year of 2007, piggyback mortgage was the only tax deductible alternative for conventional PMI premiums. A piggyback mortgage is a second loan that closed simultaneously with the first, and has much higher rate - often by up to 3% than the first one. Splits like 80/10/10 (first mortgage of 80%, second of 10% and down payment of 10%), 80/15/5 and even 80/20 (no down payment at all) were very common.
Not only borrower could deduct all interest, but the small second loan was easier to pay off, especially in those cases when it was given as a revolving equity line of credit instead of a fixed rate mortgage. As you know, revolving accounts are paid off much faster than amortized mortgage loans. But even having the fixed second loan wasn't bad at all.
These day you can't get two-mortgage loan. Banks simply stop making piggyback mortgages. And with property values plummeting every day, many homeowners find out that they have less than 20 percent equity in their homes. If they want to refinance for a lower rate - courtesy of bailout cash handout, they have to pay PMI and take one loan. Yes, PMI is tax deductible up to 2010 if certain conditions are met, but you must escrow your property taxes and homeowners insurance if you have less that 20% equity. And having tax escrow account often is quite expensive. Why piggyback loans are no longer given, I don't know, likely some new Fannie Mae and Freddie Mac regulations, which, by the way, may tap the government for up to $51 billion more in coming weeks. But if you think to lock that below-5.00%-fixed-rate-mortgage for 30 years advertised everywhere, get at a least basic idea of what you house is worth now and how much equity you have. You may be better off keeping your current mortgage.
Tue Jan 27, 2009 12:01PM | Copyright: www.bad-credit-advisor.com | More in Mortgage | Comments (0)
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