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Combination “80-10-10” mortgage

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  • Combination “80-10-10” mortgage

    We are in the process of getting a mortgage. It was recommended to us to avoid a jumbo loan to consider doing a combination loan or “80-10-10” mortgage where we have a conventional mortgage up to 510k and then an additional equity or HELOC loan for an additional 90k. The actual house price is 880k and we will probably put down somewhere between 250-300k.

    Has anyone had experience with this or thoughts on good or bad idea?

    Thank you in advance
    Josh

  • #2
    I had a colleague who did it around 2014. He had only like 10% for the down payment, but he had a new baby on the way and was buying the house on a weekend. He had the house paid off by 2019, so it worked out for him. The price of the house was about 500k, which would be less than 1x annual income for us, so I'm not sure how that effects your strategy.

    The only thing I don't know is if the HELOC would be tax deductible because it looks like it's to get you under jumbo limits, rather than home improvements.

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    • #3
      We did EXACTLY this in 2013 when we closed on our first and only home. We still live in it. We will pay off the HELOC which was also $90k originally, this year. I don’t really have any regrets and thought it was worth it. Of course when we did this the interest on the HELOC was deductible and from what you say it won’t be for you but that’s not a ton of money

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      • #4
        I think it depends on the reason if you want to know if it is a good deal. If it is because you are buying too much house then bad idea. If it is an easily affordable housing and you pay off the HELOC in short order then probably little harm.

        Other financial ducks in a row yadda yadda

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        • #5
          Originally posted by Lordosis View Post
          I think it depends on the reason if you want to know if it is a good deal. If it is because you are buying too much house then bad idea. If it is an easily affordable housing and you pay off the HELOC in short order then probably little harm.

          Other financial ducks in a row yadda yadda
          The house fits within our finances. It’s just a question of this approach versus doing it through a jumbo mortgage.

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          • #6
            Originally posted by Joshi47 View Post

            The house fits within our finances. It’s just a question of this approach versus doing it through a jumbo mortgage.
            If it gets you a better rate then yes

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            • #7
              Not sure if anyone does this anymore. When I financed my first home (condo actually), I did 80% as a primary loan, 12% as a 15 year fixed rate second, with the remaining 8% as my equity/downpayment. My thought at the time was to have a longer term loan on a longer term asset while removing the interest rate risk. The rate on the fixed second I believe was like 50 or 75 bps higher. Paid off the second in 5'ish years.

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