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Financing |
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There are a few ways to purchase a home with no down payment. One is to
obtain a loan of 80% of the value of the home, and another loan of 20%.
These two loans add up to 100%. The other is to get one big loan of 100%.
Anytime you finance more than 80% of the value of a property in one loan you
have mortgage insurance, a premium of usually 1/2 percent of the loan balance
per month. So a $200,000 loan with mortgage insurance would carry a $92
per month insurance premium. Mortgage insurance is not tax deductible.
That's why people like seconds. A second IS tax deductible. But
there is a drawback; the only way to get rid of a second is to pay it off.
If your home appreciates enough you may have a chance of having the mortgage
insurance premium removed. But then there is another drawback... the rate
on a loan financing 100% of the value of your home is usually higher than a rate
on a loan financing 80% of the value of your home. Nine times out of ten
the 80/20 financing package is $150 to $300 less per month on a typical $250,000
loan.
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