Home Equity Loans And Lines Of Credit On 80-10-10 Piggyback Loans
This BLOG On Home Equity Loans And Lines Of Credit On 80-10-10 Piggyback Loans Was UPDATED On May 15th, 2019
When homeowners need cash, they can often turn to see if they qualify for home equity loans and lines of credit. Most American families live check to check.
- However, many homeowners see their homes appreciate in value and as the years pass, they pay down their loan balances
In this articlce, we wil cover and discuss HELOC’s and second mortgages.
Typical Purposes For HELOCs
Home Equity Loans and lines of credit can be used for the following:
- home renovations
- paying down credit cards and other debt
- paying children educations
- care for elderly
- take a long overdue vacation
- prepare for weddings
- or other financial needs
- they can explore the idea of obtaining HELOCs
Other benefits for home equity loans is when home buyers need 80-10-10 piggyback loans . Home buyers can use home equity loans to do 80-10-10 piggyback mortgages.
How Does HELOCs Work
Here is how it works:
- Let’s take a case scenario where a home buyer needs to purchase $784,350 home
- The maximum conforming loan limit is $484,350
- Home Buyer does not want a Jumbo Loan and wants to do an 80-10-10 piggyback mortgage
- Buyer can put 10% down payment or $78,350
- First mortgage conforming lender will lend a maximum $484,350 conventional loan
The second mortgage lender will do a home equity loan and/or second mortgage for the difference.
Who Lends On Home Equity Mortgages
Mortgage companies do not offer second mortgages of any type. Home equity loans and lines of credit are normally offered by banks.
- While the names are similar, these two products are quite different
- With a home equity loan, the homeowner receives the total loan amount up front from a bank
- A home equity credit line gives homeowners a source of funds
- They can draw on these funds as needed like a giant credit card collateralized by their home
- However, a person’s home secures the amount borrowed
- If the loan is not repaid, the lender can foreclose on the house to pay off the debt
Let’s take a look at each of these types of home equity financing.
Home Equity Loans
Homeowners may obtain a home equity loan also known as a second mortgage. Second mortgage can be used by homeowners for any reason homeowners seem fit.
- Typically, a person can borrow up to 90 percent CLTV of the equity in his or her home
The actual amount that a lender will be willing to lend also depends on the following:
- borrowers income
- credit history
- the market value of the home
- lender assessment of borrower’s ability to repay the principal and interest of the loan is the determining factor
What Purpose Can I Use Home Equity Loans And Lines Of Credit
With a home equity loan, a person receives a lump-sum amount at the closing, and the loan is secured by the borrower’s home.
- The loan is repaid through equal, monthly payments over a stated period
- This can range from as short as 5 years to as long as 30 years
- The terms of the second mortgage loan depend on the loan’s terms
- Interest only is common as well as fixed interest rates
- Variable home equity loans are available as well
If the loan is not repaid, the lender can foreclose on the home.
What Can Proceeds From HELOCs Be Used For
Borrowers can use the funds for almost any purpose:
- doing home repairs
- paying for college
- paying off other high-interest debt
Because mortgage interest rates on home equity loans are typically much lower than other creditors such as credit card companies, many homeowners with equity in their homes will take out home equity loans and lines of credit rather than use credit cards to pay for purchases.