A combination loan allows borrowers to split up the total loan balance into separate mortgages. Also referred to as 80/20s, combination mortgage loans make it possible for borrowers lacking a 20% down payment to avoid costly private mortgage insurance (PMI) and keep their monthly payments low.
Combination home loans are likely split into a first mortgage at 80 percent of the loan amount, and a second mortgage or “piggyback” loan that closes simultaneously with the first mortgage. The second mortgage in a combination loan, usually in the form of a home equity loan or line of credit, is financed at a higher rate than the first mortgage since it’s tied to short-term interest rates.
To learn more about alternatives to combination loans or other low down payment programs that allow you to avoid paying costly mortgage insurance, give us a call at (800) 251-9080 to talk with a Quicken Loans Mortgage Expert today.