19 Dec 07 The New Combo Loan

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Any home loan over 80% of a homes value requires that the homeowner takes out a mortgage insurance policy. Traditionally, a Combo Loan has been a term used to describe the process when a home buyer takes two loans out on a property to avoid mortgage insurance. The first loan is typically at 80% of the homes value; the second loan makes up the other 20%, or the percentage that is left over after the down payment. This loan is also commonly referred to as an 80 – 20 loan or a 100% financing loan.

More recently, lenders are using the term Combo Loan to describe the process of bundling all or most of the consumer’s dept into one large loan with a low interest rate. This loan would include the home loan(s), car loan(s), and credit card debt; other consumer debt may also be included. The benefit to the consumer is that their debt is consolidated into one or two monthly payments, it becomes preferred debt and they lower their monthly bills. Another benefit of a Combo Loan is that it doesn’t affect the consumer’s credit rating the same as other popular consolidation programs.

There are several Combo Loan programs available. In most cases, the Combo Loan program is setup so that the borrower makes two monthly payments or takes out two different loans. One loan is setup on a 30 year payment plan and the second is setup to be paid over 15 years. There are many more options available so before considering a Combo Loan, be sure to seek advice from a qualified professional. Make sure you weigh the benefits against the costs as these loans are not for everyone. Often, consolidating debt into one loan can free up extra money each month which will allow you to save more or put more money toward your current debt.

Tags: 80 / 20 loan, combo loan, debt to income, eighty twenty loan, financing, home loan, mortgage loan, preferred debt