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This would allow for 100% financing. The first loan is set up for 80% and can be a fixed, ARM, or interest only rate loan. The second loan would be for 20% and in second lien position and is usually a vaiable rate based on prime. It generally is set up as an interest only loan for the first 10 years. These can also be set up as fixed rate loans. There is no PMI insurance on a 80/20 loan.
- These loans are becoming popular for buyers who are looking for 100% financing on a purchase. They are alternatives to using government programs, such as FHA and Rural Development, that offer 100% financing.
The interest only programs help keep the monthly payment lower and also may offer the purchaser an opportunity to get into a higher loan amount.
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