Refinancing An 80-20 or 70-30 Mortgage Loan

Terry L. Kramer

You initially chose an 80/20 or 70/30 loan for one of two reasons: you don’t have funds available for a down payment or you want to avoid having to pay private mortgage insurance (PMI). You have two loans: one for the majority percentage of the mortgage; the other for a minority percentage value that is typically used as a line of credit. Refinancing is not always possible on these types of loans, and it is not always wise.

Refinancing a loan can be a good idea if the interest rate you qualify for is less than the rate you currently have. This can be especially appealing to you, if you have a variable interest rate.

How To Know If You Qualify For A Refinance

If you owe more on your current 80/20 or 70/30 loan than what your property is currently worth, you won’t be allowed to sell your property or refinance–until you pay off your loan. Keep in mind that if property values in your neighborhood have been rising, the amount you owe may actually be less than what your property is worth. You may wish to have an appraisal done to find out.

How An 80/20 or 70/30 Mortgage Refinance Works

An 80/20 or 70/30 mortgage refinance can provide options for the borrower. For instance, you may find it worth your while to make a balloon payment and pay off the smaller loan amount and acquire a lower interest rate on the remaining amount owed on the larger loan.

It also may be possible for you to refinance both your loans and acquire lower interest rates and lower monthly payments, if you’d like to maintain two loans. You might even qualify for a new second loan that gives you a new, higher line of credit.

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