subject: Miami Beach Luxury Condos Financing Piggyback Loans [print this page] The three types The three types
If you're looking for a piggyback loan to finance your Miami Beach luxury condo purchase, you have three options: 80-10-10, 80-20-0, and 80-15-5. Each number corresponds to a specific element of the mortgage. The first number indicates the 80 percent of the total homes value, which will be provided by the first lender. The second is part of the down payment, which will be provided by another lender. Lastly, the last number is the amount (down payment) you must provide to complete the financing.
In the second instance, 80-20-0, 80 percent of the homes value will be financed by the first lender and the entire down payment by another lender. This means that you dont have to pay for the down payment but will most likely pay off the amount just as you would your home mortgage.
Benefits of Piggyback loans
If you cant complete the down payment for your Miami Beach luxury condo, youll find piggyback loan as a desirable option. This is probably the most beneficial aspect of the loan. Since most lenders, nowadays, require homebuyers to pay as much as 20 percent of the total home value as down payment, those with less than that amount can turn to piggyback loans.
This type of financing spreads the risk of the loan between the two lenders. This easily qualifies you to purchase the property with little to no down payment. In addition, the approval process of this type of loan is easier than those of the conventional mortgage type.
The Pitfalls
The major disadvantage of piggyback loans is the rate. Unlike standard mortgage types, the combined rates of two or more loans can be overwhelming especially for first-time homebuyers or those with uncertain financial future. The first lender might be willing to drop the rate due to the significant amount of financing they will provide for the borrower. This isnt true, though, for the second lender. Since lender two will only answer for 5 to 20 percent of the total home value, he might be more inclined to provide the financing if there is a guarantee of higher interest return.
Furthermore, most piggyback loans have significant balloon payment at the end of the loan term. Compared to standard mortgages, youll find this amount greatly overwhelming. But if you plan early and anticipate such payment, your Miami Beach luxury condo will be safe from any financial trouble in the future.
