| An increasingly attractive mortgage option is what is | | | | mortgage loans. |
| referred to as the combination loan or combo loan. | | | | Combination loans are available in many other ratios as |
| Combination loans have several key advantages over | | | | well. The 70/30 mortgage loan is usually preferred to |
| traditional 30-year mortgage loans and there are a | | | | the 80/20 loan for more expensive homes, when 80% |
| wide variety of combinations to suit most financial | | | | of the homes value would be classified as a jumbo |
| situations. | | | | loan (above the FNMA/FHLMC limit) and subject to |
| By far, the most popular combination mortgage loan is | | | | higher interest rates. |
| the 80/20 loan. This loan is actually two loans; the first | | | | Another option is the 80/15/5 mortgage loan, where |
| loan is for 80% of the homes value, and the second | | | | the buyers makes a down payment of 5%. Other |
| loan is for the remaining 20%. With the 80/20 | | | | options include the 80/10/10, 75/15/10, etc which are all |
| mortgage loan, the buyer pays no down payment and | | | | variants of the same. |
| is ideal for those without a significant amount of | | | | In combinations mortgage loans, the primary loan |
| savings. Another key advantage of the 80/20 | | | | usually has a 30-year amortization term, while the |
| mortgage loan is that the buyer avoids PMI or private | | | | second loan can have 30 or 15 year term. Expect the |
| mortgage insurance. PMI is required on all mortgage | | | | interest rate to be about 2% higher for the second |
| loans that are greater than 80% of the homes value. | | | | loan. The buyer can opt for a fixed rate mortgage or |
| A third advantage of the combination mortgage loans | | | | an ARM (adjustable rate mortgage) on either or both |
| is that both loans are tax deductible. By avoiding PMI | | | | loans. The ARM will have a lower monthly premium |
| and increasing their tax deduction, a buyer gains a | | | | and allow for additional cost savings, but be sure to |
| significant cost savings advantage over traditional | | | | refinance the ARM loans if interest rates start to rise. |