When purchasing a home, it’s expected that you’ll put at least 20% down. However, all buyers are different and not all have the finances to go that route. There are a number of options out there and applying for a second mortgage may be something to consider.
If you have a 5%-15% down payment, you may be able to finance your home with a first and second mortgage loan. Your first loan would be more traditional with an 80% loan-to-value ratio (LTV) and the second loan would be a revolving line of credit in the form of a home equity loan, also known as HELOC. The first mortgage essentially covers most of the costs while the second will cover whatever is left. There is always the option of paying 10% down with one mortgage and paying the required Premium Mortgage Insurance (PMI).
When making a decision, keep in mind the traditional first mortgage will likely have a higher monthly payment in early on. This is because your mortgage insurance may cost $100 or more per month depending on the balance of your loan. If you have a second loan, there may be options where you are only responsible for paying the interest, which could provide you with an even lower monthly payment. Contact your mortgage professional to help you decide what will work best for your individual situation.