Combo loan or 30 year fixed 1 loan - What is better, going with an 80/20 combo loan or going with a 30 year fixed 1 loan? There are many factors that will determine which is the better option. Rates, PMI, loan terms and many other factors will help to determine which is the better option.
Combo loans are increasingly becoming a favorite loan program for first time home buyers and home buyers who do not have enough money to come up with a down payment. These types of combo loans are commonly referred to as 80/20 loans and 100% financing combo loans.
One thing to consider with 80/20 combo loans is that there will be 2 sets of closing costs, since each is treated as separate transaction. You mortgage professional should be able to give you a blended rate to know what your interest rate is for the entire loan amount. Also, you will paying 2 lenders per month.
The first thing to look at is the monthly payment: which type of program is more affordable? If you can afford to pay down the 20% portion of your loan rather quickly, that option may work for you. The main thing to do obtain a Good faith estimate for both programs in order to compare them.
What is a combo loan? - Have you heard of the term combo loan and dont understand exactly what it is, why it is used, and what the benefits of a combo loan are? You are not alone and this is a very highly asked question. A combo loan is a type of mortgage loan where a combination of 2 loans is used versus 1 large loan. Normally a combo loan is used to avoid PMI and to save money on your monthly payment.
Many jumbo mortgages used to purchase or pull cash out of property are structured as combo loans, with a first mortgage and second mortgage or line of credit.
In a combo loan the second mortgage will have a higher interest rate than the first mortgage. Your mortgage broker will more than likely quote you a blended rate which is the average of the two interest rates combined.
Combo loans are typically broken into 80/20 or 75/25 loans. The first number represents the percentage of the loan amount covered by the first mortgage, while the second number is the percentage of the second mortgage. A 75/25 loan will generally offer a better interest rate on the first mortgage.