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Piggyback Mortgages

Piggyback Mortgages

Piggyback Mortgages are making a comeback

For home mortgage loans over $417,000, piggyback mortgages are making a huge comeback.

According to the 2013 Annual Real Estate Survey of the American Bankers Association:

Piggyback mortgages accounted for 3.8 percent of all loans originated by bankers surveyed in 2012, compared to 1.7 percent of the loans for 2010.  To read more reports click here.

A Piggyback Mortgage loan means a home mortgage borrower is being underwritten for two mortgages simultaneously.  The second mortgage can be structured as a home equity loan or a home equity line of credit.

Piggyback mortgages lost their popularity in the housing downturn, but now they are returning.  They are used to avoid paying for mortgage insurance when a borrower does not have 20% down.

When the lender has more than an 80% loan to value on a property, they require mortgage insurance from the borrower.  Getting around paying for this mortgage insurance is the purpose of the piggyback loan.

 How to Avoid mortgage insurance with a Piggyback Mortgage

  • Down payment:  10 percent of the purchase price or appraisal value, whichever is lower.
  • 1st Mortgage:  80 percent of the purchase price or appraisal value, whichever is lower.
  • 2nd Mortgage:  10 percent of the purchase price or appraisal value, whichever is lower.

But there is still another great reason to use a piggyback mortgage:  to avoid going over the conforming loan limit.  The conforming loan limit is $417,000, and when you borrower more than $417,000 the mortgage is called a jumbo loan, and they tend to have higher interest rates.  Sometimes it can be advantageous to get a mortgage for the full amount, and sometimes it costs less to use a piggyback mortgage.

It is really a game of mortgage comparisons.  To get a free mortgage options analysis for your particular situation, click here.

 Disadvantages of a Piggyback Mortgage

  • When it comes time to refinance, the mortgage company that holds the 2nd mortgage has to agree to remain in 2nd lien position on title.  This is called a subordinate lien position, behind the primary mortgage company.  The agreement we will need is called a re-subordination, and they are usually pretty simple to apply for.
  • It is not easy to tap into the home equity, as 3rd mortgages are not usually allowed.
  • The inconvenience of making two separate payments instead of one.
  • Requires a good FICO score.
  • Requires at least 10% down.

Have a question?  Ask it here.

Posted in: Conforming, For Buyers, Jumbo, Mortgage Types

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Tulsa, OK, Condos Appreciate Faster than Comparably Sized Houses

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Tulsa, OK, Condos Appreciate Faster than Comparably Sized Houses

A condo can be a great retirement investment if you let a renter pay for the equity on your behalf.  It is the only retirement investment I can think of where you can get someone else to make your entire monthly contribution.  I don’t know how to teach you to get someone to buy you an annuity or IRA, but I do know how to collect income streams off of real estate.  Next to employer matched 401k’s, Condo income-streams, for me, are a strong recommend.

Condos are making a comeback.

Income – Costs = Profit

Condos have better fixed costs than rental houses.  The maintenance expense is minimal, condominium property insurance is a slightly more expensive than renter’s insurance, and real estate taxes are thinned by the quantity of units.  This is a sexy investment.  Some are high-rises looking over rivers and downtowns.  Some are nestled in tree-lined greens of common area.  There is a Tulsa, OK, condo that is built in a public park.

Condos are appreciating Faster

As compared to one year ago, condo values are appreciating much more aggressively than single family residences (reference to the  Case-Shiller Index).

Five years ago, condominiums were among the most distressed sectors of the United States housing market.  Investor’s had bailed out on depreciating assets, and condos became more and more unwanted.  As condo unit owners stopped paying, their condo associations became under-funded, and unable to pay the unit’s common-expenses.  Many complexes failed, and values diminished.

Opportunities in the market

Tulsa, OK, condominiums are making a comeback.  Today, along with the revival of urban living, the condo lifestyle is becoming more popular. And many are virtually maintenance free.  Condo developements represent one of the best places to find real estate, and potential future cash streams, at “good value” prices.  Whether as an owner-occupied residence or as a rental income stream for life, there are opportunities in the market.

To get interest rates and costs for condo financing, click here.

For HUD approved condos, click here.

 

Posted in: Condos, First Time Home Buyers

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