First, what is a secondary mortgage? The second mortgage is the same as the first mortgage, but it is generally small in amount and high in interest rate. In the late 1990s and early 2000s, the second mortgage was very popular. Because 80% of the value of the house is paid in advance for the second mortgage after the first mortgage, I basically bought a house without advance payment.
Although this approach has almost disappeared, there are still 80/15/5 loans. You can provide funds for 80% of the house payment, and then provide a second loan for 15% of the house payment at a higher interest rate, and then pay 5% of the advance payment. Or 80/10/10. I chose 80/15/5 for the family photo, and the result is good. Because the interest on the house loan is tax-free everywhere, 13% or other interest on the second mortgage loan It won’t torture us too much. I’ll ask why.
Three reasons
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Avoid using PMI – What is PMI? PMI represents personal guarantee insurance. Many institutions will require PMI to be carried with them on 20% of the down payment of unused loans. Basically, PMI is to protect the bank. If you do not have 20% advance payment, that means your wallet is lighter. Because you have to pay insurance every month until 80% of the principal is paid. If you receive a second mortgage, in part or in full, you do not need to pay PMI every month.
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Better cash flow – suppose you are buying a house. This is your first time out. You save money and put a penny in 20% of the advance. Your bank has $20000. You are ready. So you can buy a house of 100000 dollars as long as you reduce it by 20%. Depending on your position in the world, this may lead to a good house. In many cases, It may give you a fixed house. “If you leave all your 20000 dollars at home, what are you going to use to repair it, or do it yourself?” Home decoration is expensive. My wife and I spent 5000 dollars on paint and supplies in the first week of our first house. Should we do this? No, but it makes the house more like a house to us. This is very important.
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Avoid large mortgage loans – In the United States, according to the definition of the Residential Economic Recovery Act of 2008, large mortgage loans refer to residential secured loans exceeding $729750 or small amounts above 125% of the median residential value in the MSA. As house prices rise, entering a good place may mean a huge mortgage loan. I saw on TV that small houses in California were sold at a price of 800000 dollars. Because the amount is so large, the bank will set a higher interest rate in the loan in order to make up for the greater risk. The loan is divided into two loans to avoid higher interest rates. Then you can put more money in your pocket.
The second secured loan is now more difficult to obtain, but not excluded. If you think you can get a discount through the above three methods. Please contact the loan agent or intermediary. They will lead you in the right direction.
