The Combo Loan blends a maximum first mortgage with a 15 or 30 year second mortgage. The first mortgage can be one of a variety of conventional or jumbo fixed rate, ARM or balloon loans.

The most popular use of a combo loan is to combine a first and second mortgage as a way to avoid mortgage insurance. If you have a 10% down payment (or equity), you can obtain a first mortgage for 80% of the home value and a second mortgage for 10%. This loan structure avoids the mortgage insurance traditionally required for 90% loan amount to home value loans.

Another common strategy is to use combination loans to avoid jumbo financing, which carries a higher interest rate than conforming and or loan amounts. The first mortgage is taken out for the maximum conforming loan limit and the reminder of the financing is secured with a second mortgage.

If you pay off the second, your monthly mortgage expenses will drop, unlike making substantial prepayments on one, larger fixed rate loan. Both loans are processed and closed simultaneously, although they are serviced individually.

Combo Loan Program Fills These Needs:

• Eliminates mortgage insurance
• Interest on second mortgage may be tax deductible
• Eliminates mortgage insurance requirement saving money at closing and on your monthly payment.
• First mortgage can be conforming thereby avoiding the higher interest rates associated with jumbo financing.
• Second mortgage can be pre-paid with no penalty
• Second mortgage may amortize over 15 years resulting in quicker equity build up
• Second mortgage amortized over 30 years will carry a lower payment