RECENT TRENDS OF MORTGAGE IN NEW YORK
Lenders in New York are trying to make up for the decline in mortgage applications by introducing alternative payment plans for the loan programs they offer. These plans include low initial monthly payment so that borrowers can qualify for long term loans and save part of their income for other expenses. You can use our calculators to see how much you can save by reducing your monthly payment. A widely popular payment option is the interest-only method of repayment. It allows you to pay only the interest for a stipulated time period and then you can continue with the principal as well as interest in order to pay down the mortgage debt. But then, there is also a certain amount of risk involved. Borrowers who occupy the property more than the expected time frame have to bear high mortgage costs due to possible hike in mortgage rates. Where interest-only loans are making their way into the New York mortgage market, another kind of mortgage – the low or no-doc loans are also gaining popularity. These kinds of loans are specially offered to self-employed individuals and require a verification of their assets and not the income. Unlike traditional mortgages, it is not the income that decides their ability and their creditworthiness. No-doc loans are quite risky as it may often be offered to less creditworthy borrowers. Another popular mortgage in New York is the 80-20 mortgage or piggyback loan. When home prices are on a hike, borrowers mostly go for 100% home financing that does not require private mortgage insurance. Here is where the piggyback loan comes into help for borrowers. Here the borrower has to take 2 mortgage loans – the first against 80% of his property value and the second against 20% of the property value. What benefits the borrower is that they don’t require saving thousands of dollars for paying any down payment. This is what seems to lure New York mortgage borrowers to take up piggyback loans. The piggyback loans allow you to make low monthly payments by providing the interest-only payment option. But borrowers often fail to bear high rates on the second mortgage that is variable in nature. In spite of this feature mortgage New York borrowers are opting for the piggyback loan because the combined monthly payments on the 2 mortgages add up to an amount which is less than the monthly payments on a single mortgage with private mortgage insurance. No doubt, you can avoid higher rates on a second mortgage and take a single loan with PMI. But even if you stop paying for your PMI after you build up 20% home equity, it takes atleast 5 to 10 years Even if you get mortgage insurance canceled promptly at the two-year mark, it might take five to 10 years to recoup the total costs of PMI. This is another factor behind the popularity of piggyback loans. Also, the concept of mortgage interest deduction on 2 mortgages has provoked borrowers to opt for these mortgages. Knowing very well that PMI won’t offer them any sort of tax deduction, New York mortgage borrowers have applied for the piggyback mortgages. Borrowers in New York have shifted from traditional mortgages to risky home loans with interest only payments along with a variation in the rates for the past few months. But experts however predict that the difference in rates is likely to decline towards the beginning of the next year. Lance Williams is an accomplished writer specializing in mortgage and real estate and currently contributing for MortgageFit. Lance Williams read all articles | submit an article for review
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