Split financing (also referred to as “combo financing” or a “piggyback loan”) in regards to mortgage lending means that you are splitting the financing you require into two loans, funded at the same time. The 1st mortgage covers the bulk of the financing and the 2nd helps finance the remaining required. There are a few reasons why you would consider this type of loan option:
- If you are in need of a Jumbo loan, but only have 10% down, you can secure a 1st mortgage up to the conforming high-balance loan limit, and the remaining as a 2nd. A straight 1st jumbo loan typically requires 20% down, so this allows for less money down if your purchase price is in a certain range.
- If you have less than 20% down and would like to avoid paying Private Mortgage Insurance (PMI), we can run the numbers to compare what makes more sense. PMI is not tax deductible, whereas the interest paid on mortgages is (up to a certain amount), so this can also be a part of your calculation.
- Even with 20% or more down, qualifying and lending guidelines can be much more lax on a conforming loan than a jumbo loan, so if there is anything in your loan package that is tricky to get jumbo financing, it may be beneficial to do a 1st mortgage loan up to the conforming loan limit and the remaining as a 2nd.
It is paramount to work with a lender that can provide you with the options that do not just fit your needs to secure financing, but also that may be more beneficial for you in the long run. Reach out if you would like to do a review for your scenario.
