80/15/5 second mortgage or trust

GreenLantern

Met with the realtor last night and talked to their mortgage officer. She mentioned an 80/15/5 second mortage or trust to avoid paying the PMI (private mortgage insurance) and thus saving money. Anybody done this before? You basically get two payments. One for the original mortage and one for the trust.

The only way I can see that this is good is if you pay the trust off ahead of schedule (with no prepay penalties that is).

Should I stay away from this??

http://www.nva-mortgage.com/80_15_5.htm (this is just a description on this site, not affiliated with the realtor we talked with)

salzo

I dont know about the trust, and I am far from a financial expert, but I recently refinanced my home.
I changed my mortgage from a 30(with about 23 years left) into a fifteen yearmortgage.
The PMI was dropped, and I now pay my own taxes, qqhich has made my payment less, due to the fact the old mortgage company always had to have a cushion in escrow.
When everything is added up, I pay $11 dollars more a month, and knocked about 8 years off my mortgage.
Seemed like a good deal to me, and my accountant did not object.

"The powers delegated by the proposed constitution to the federal governmentare few and defined, and will be exercised principally on external objects, as war, peace negotiation, and foreign commerce"
-James Madison

BoltactionMan

Green Lantern,

I would advise you to go with the PMI. Sure it makes your monthly mortgage higher but it will probably be less than the two payments combined. PMI is not forever, under federal law, your rate has to automatically drop after 10 years and must come off when you reach and 80% loan to value ratio. She would have to really explain to me how you save money with that. Also, I believe that the loan programs allowing that practice may carry a slightly higher rate.

Somewhere along the line you will probably sell or refinance the home. The appraised value at the refinance would possibly let you drop the PMI then, similar to what Salzo had happen.

I am a loan officer with a bank, and people try everything to get out of PMI. The only cure is more money down. If you don't have that money, PMI helps a qualified buyer get a house today and begin building equity.

salzo

Boltactionman- The value of our house increased dramatically after we purchased it-and since the value of the house was so much higher than what was owed,we were able to go without PMI insurance.

"The powers delegated by the proposed constitution to the federal governmentare few and defined, and will be exercised principally on external objects, as war, peace negotiation, and foreign commerce"
-James Madison

offeror

I shiver when I hear the words "second mortgage" because I made the big mistake of doing that once when I was in financial trouble and using the proceeds to pay off my credit cards. Then, when things didn't improve, the bill consolidation loan (second mortgage) was a secured loan whereas the cards had been unsecured -- which meant I couldn't keep the house in a bankruptcy action unless I continued to pay both mortgage loans and get agreements from both lenders. My advice to anyone is not to do a second mortgage if it will cause you problems should you ever have a financial setback or medical problem. You need to be able to maximize your equity and keep your house.

I'm not at all sure this is relevant in this case, but it bears saying whenever the topic "second mortgage" comes up. Don't exchange unsecured debt for debt secured by your home to ease financial troubles.

- Life NRA Member
"If cowardly & dishonorable men shoot unarmed men with army guns, the evil must be prevented by the penitentiary...and not by general deprivation of constitutional privilege." - Arkansas Supreme Court, 1878

Edited by - offeror on 06/07/2002 14:45:15

Brth729

GreenLantern--Talked with you some a little while back. Sounds to me like you and your lady friend have found something you're interested in. Have you? My wife and I have finally found one, and we're in the processes of trying to come to an agreed upon price. So far it's looking like we'll get away with it for about 15 grand less than what they than what they were originally asking. Can't really help you out with your question, but just wanted to let you know that I hope things turn out good for you. Hope you get what you want and are happy with it.

***I'm in the hi-fidelity first class travelling section I think I need a Leer jet***

GreenLantern

Brth729 - Great to here things are going good so far for you! $15K? Now that's a savings!!

We looked at an awesome house last night but we still had a few questions that we were going to try and get answers to this morning and then make the offer. Called the agent and someone already made an offer after seeing it last night. Just after or just before we viewed the house. Guess we didn't think 12 hours was that important but we're learning. It was only the 3rd house we looked at so far so we were a little hesitant to jump right away. We're smart enough to know that there's no house we 'have to have' but we're regretting not moving forward faster. Oh well, live and learn.