20% Down Mortgage is Better?
I have not purchased a house yet, but I am currently saving up for a somewhat hefty downpayment for my first home, and I’ve gotten a lot of good information, and some that I’m not so clear on, from friends, and from financial advice experts whose articles and columns I read.
Does anyone else know anything about the general rule that a 20% or more downpayment can save you a lot in your homeowner’s insurance, and it is something having to do with escrow?
A friend of mine also told me that I should try to build, rather than buy a pre existing home, because she said “everything breaks in ten years anyways” like the big appliances and heating systems etc., so if you start from scratch it helps you in the end with having to replace everything at odd times of the year.
Also, I guess building a home rather than buying a used/lived in home can actually be the more economical way to do it…..I still need more convincing though.
Unfortunately this is an area where I haven’t educated myself enough to go into the mortgage and home buying process with a lot of knowledge under my belt.
I do know it’s a decent home buyer’s market right now, and property values just keep going up and up and up, so I’m anxious to stop wasting money on rent and actually putting something into home and property equity.
The 20% rule means if you do not have 20% equity in the property you have to pay mortgage insurance. The lender charges this because the loan to value is so high that there might be a chance of defult on the loan.The lower the loan to value they think somebody who has that much money into a property would not be likely to defult on there loan. So they want insurance to cover incase that would happen. You can get what is called a 80/20 loan or a piggy back loan. What that is a 80% loan with reg. rate and than a 20% loan with a higher rate. Interest you can wright off on taxes Mortgage insurance you can’t. So you have to figure out which one will save the most money. Also once your house value goes up to where you have 20% equity you can contact your lender and have the mortgage insurance removed.Hope this helped some what. As for the new home vs. the old from my own personal experience newer isn’t always better. Always check out the builder you use very, very well. If you have any other question in regards to mortgages please feel free to call me. Thanks and take care.
Jessica
1st Metropolitan Mortgage
410.414.9411 ext.1030
443.871.0381
Comment by Jessica — May 23, 2006 @ 3:12 am