Is 2nd mortgage still available and when is getting one feasible for you?

I came across an article written by David Krichmar, Mortgage Broker of Schmidt Mortgage Company, www.DaveYourMortgageGuy.com which in my opinion is good information for buyers and also for us as Realtors. I also want to thank him for allowing me to re-blog the following useful information.

"When getting a mortgage you will want to know all your options?  And of course you want to make sure you are choosing the best mortgage for your needs.  Many times I hear that other banks do not offer 2^nd mortgages of that they do not exist.  I am here to say they do exist and to explain when getting a 2^nd mortgage could be best for you. 

Jumbo Loan

A jumbo loan is considered any conventional loan with a loan amount over $417k.  So what do you do if you loan amount is over $417k?  You could get a Jumbo mortgage, but the rate for a Jumbo Mortgage is usually .75% to 1% higher then a normal loan.  But if your total loan amount is small enough you can split the loan into 2 loans.  You can keep the first loan at $417k and get a 2^nd mortgage for the difference.  As an example, you have a $500,000 loan.  Your rate could be 6% on a Jumbo loan.  Or your could do 2 loans, one at $417k and a 2^nd mortgage of $83k with a rate of 7.5%.  The option of 2 mortgages would save you about $180 a month. 

Waiving your Escrow account

Waiving your escrow account means to not include your taxes and insurance in your payment.  The only way to do this is to put a down payment of 20% or have 20%+ equity in your home if you are refinancing.  Or you could use a 2^nd mortgage to make up that 20%.  As an example, your home is worth $200k and you need a new loan of $190k.  based on this you would need to include your taxes and insurance in your payment.  Or.... You could do a first mortgage of $160,000(80%) and a second mortgage of $30,000.  This would allow you to not include your taxes and insurance in your payment

Mortgage Insurance is Not Tax Deductible for You

If you make over $109,000 a year, mortgage insurance is not tax deductible for you.  But if you get a conventional loan for more then 80% loan to value(less then 20% down payment), you will have it.  Unless you get two loans.  Another example, you only want to put a 5% down payment.  So you would want to do a first mortgage for 80% of the sales price and a second mortgage for 15% of the sales price. 

A Lower Payment 

Some times getting a 2^nd mortgage will allow you to get a lower payment.  Just like our example under "Jumbo Loans".  But you can also save on  your monthly payment if you are not getting a Jumbo loan.  Let's say you are buying a home of $200k with a 5% down payment.  If you chose to get one loan with mortgage insurance your payment would be about $88 higher then a mortgage option of two loans.

Keep in mind 2^nd mortgages are not for everyone.  You have to have great credit(680+).  They expect you to have money in the bank for reserves and there may be other requirements.  A rate on a 2^nd mortgage can be from 6.99% to 9%.  And the min loan amount is $10k to a max of $100k(sometimes higher).  Our home is our biggest asset, make sure you are getting the best mortgage for that home.  Whether you are buying a new home or refinancing that home, call me today to make sure you are getting the best mortgage possible."