Second Mortgage

Buying a property is a tremendous wealth building strategy for most Americans.

If you are not careful, however, the strategy can go bad because of negative amortization issues. The United States has a strong middle class, which makes the country one of the wealthier in the world. One of the foundational elements of this middle class is homeownership.

Simply put, homeownership is a method for building wealth via paying off mortgages and realizing gains through appreciation. The government realizes this and provides incentives such as capital gains exemptions and mortgage interest deductions to facilitate further growth. Read the rest of this entry »

Private mortgage insurance, or PMI, is the safety net of the lender.

PMI benefits lenders because it guarantees payment on the balance of loans not covered by the sale of foreclosed properties.

If a borrower makes a down payment of 20% of the cost of the home, the lender can generally trust that he will make his mortgage payments faithfully to protect a large investment. In this case, the lender comes out ahead if the borrower is forced to foreclose on his house, because the lender loans 80% of the cost of the house, but will probably recover 100% of the cost of the house. But, if the borrower makes a smaller down-payment, such as 3%, 5% or 10%, and borrows the rest, and then defaults on his loan, the lender loses money. Read the rest of this entry »

Buying a second mortgage for homes has emerged as a feasible option for people who are unable to make the requisite down payment for the property.

First of all it is important to understand how a second mortgage works. Suppose you wish to buy property and don’t have the required 20% of the sale price as the amount to make the down payment. One option for you is to opt for private mortgage insurance for the required amount. In this, you will again need to make a small down payment and then make monthly installments for the rest of the value. Read the rest of this entry »

The Piggyback Second Mortgage provides an option to home buyer who can not afford a twenty percent down payment.

Without enough funds for twenty percent down payment, the home buyer pays an expensive Private Mortgage Insurance (PMI). Mortgage Lenders are able to provide the usual ten percent second mortgage without PMI. Only a few mortgage lenders can provide fifteen or twenty percent second mortgage without PMI.

Another term for piggyback second mortgage are 80/10/10, 80/15/5, 80/20/0 mortgage. The 80/10/10 is the most popular. There are only a few who provide 80/15/5, and 80/20/0. The three numbers represents the percentage of first mortgage, second mortgage, and down payment. For example, the 80/10/10 means eighty percent first mortgage, ten percent second mortgage, and ten percent down payment. Read the rest of this entry »