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80/20 Mortgage Loans                                                                                                        

80/20 mortgage loans are combination financing or piggyback loans and offer a convenient way to provide financing in a purchase, refinance, home improvement, or debt consolidation transaction. Email me with questions about 80/20 mortgage loans In a purchase transaction, a second trust is used in combination with a first to avoid paying PMI. The first mortgage is always set at 80% of your purchase price eliminating the need for PMI. Add a second mortgage of 20%. There are two versions of 80/20 mortgage loans offered by several lenders. The first 80/20 mortgage loan will require you to have 3% cash in the 80/20 mortgage transaction (covering your closing costs) and the second requires no cash at all. I have had clients close there 80/20 mortgage loans with no cash by having the seller pay their closing costs. 80/20 mortgage loans will allow combined loan amounts up to $650,000.

You have a wide range of mortgage options on this loan, including fixed rate or arms. Also, interest only 80/20 mortgage loans products are often available as well. Several advantages to consumers using 80/20 mortgage loans include:

  • Your entire mortgage payment is tax deductible (mortgage insurance is not)

  • You may decide to pay off your second early reducing your total payment.

However, there are some potential problems with the strategy.

  • Your second trust may include a prepayment penalty - Our programs do not

  • Depending on the rate on your second your total payment may actually be more. Send me an email with your anticipated sales price and I will be happy to run Good Faith Estimates comparing both approaches for you.

Second Trust Ratios

A second trust is secured by your property which takes second position to the first trust. A second trust usually carries a fixed interest rate for the life of the product and amortization periods range from 5 to 20 years with a great new product amortized over 30 years with a balloon due in 15 years. The longer amortization period lowers your monthly payment significantly. Generally, your total debt ratio should not exceed 45% of your monthly pretax income.  Depending on credit scores, an interest only HELOC may also be available to you as well

Several of our lenders are now offering interest only options which can often lower your payment or allow you to purchase more house. I have a rather extensive section detailing these new Interest only options.

I have included a page on how to calculate your 80/20 mortgage loans qualification ratios.

I have included a page on documentation requirements.    I also have a Free report "Buying your First Home" available by email.

We offer you the ability to qualify and close into several unique programs which accommodate borrowers with non traditional income or asset situations. Please visit my No Docs page for additional information on a No Documentation Second Trust. 

Read more about 80/20 mortgage loans Closing Costs

Search the site for more information.

As a Certified Mortgage Planning Specialist, I offer an analysis of your situation today can make suggestions on how small changes in how your debt is structured today can have a life changing effect in the years to come.  Read more about this free, no obligation service.