by Pat Zaby
August 6, 2010 8:39 AM
Recently, I bought ten ears of corn for one dollar; one of the summer bargains. Everyone understands that you pay less when certain produce is in season and more when it isn't Supply and demand dictates the price and the availability.
If you don't see artichokes in the market for a while, it certainly doesn't mean they're not growing artichokes anymore; it just means they're not currently in season. When the banking crisis occurred, certain types of mortgages were pulled off the shelves. Now that the market is starting to even out, some are starting to reappear and 80/10/10 mortgages are among them.
The advantage of an 80/10/10 mortgage is to avoid the expense of mortgage insurance for buyers wanting a 90% loan. A buyer can obtain an 80% first mortgage and a 10% second mortgage with a 10% down payment.
The reason they were temporarily not available was the lack of investors who were willing to loan the second mortgage. The decline in property values in the past few years have wiped out the equity of many homeowners and even the security of the 2nd lien holder. However, now that values have stabilized in most markets and are even on the rise in some, investors are willing to consider the 80/10/10 again.
In the example, you can see that the 80/10/10 can save a buyer $93.46 per month which can be a considerable amount of money over the life of the mortgage. The interest rate on the second loan will be higher than the first because there is more risk to the investor.
There are different ways to pay for mortgage insurance but a common method is a monthly factor which is added to the interest. The rate below contain both the interest rate on the mortgage and the monthly mortgage insurance.
Helping buyers make better decisions is a valuable service real estate professionals can provide. Having the right tools and information can make the decisions easier to understand.
