Question by Aqua: What is a 75/25 mortgage and how does it work? Would I be making 2 mortgage payments a month?
My broker is suggesting a 75/25 mortgage which he says is good because you do not have to pay mortgage insurance, but does anyone know other details about it? Thanks!
Best answer:
Answer by togashiyokuni2001
It’s two loans. It’s a first loan for 75% LTV, with a subordinate second of 25% LTV. In many cases, it’s cheaper to do that than pay MI. But if LPMI is available, it’s usually cheaper to do that. It usually depends on your Fannie findings, and really more things than I can go into and keep your interest. Anyway, if the same lender funds both loans, they’ll probably only send you one bill, but a bill that is itemized to show that you’re paying on two loans. The rate for the first one will be a conforming rate, but the second will be about 8-9%. If this is a purchase, watch your prepay penalties, especially if you go into the house with equity, because if you have sufficient equity going in, you can refinance after 6 months using the appraised value for LTV, not the purchase price, and then get one loan with no MI. You’d have to refi for 80% or less, though.
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