How They Work and Why You Might Need One
If you’re in the market for a new home, you may have heard of something called a “90% loan to value mortgage.” But what is it? How does it work? And is it right for you?
A loan to value mortgage is a type of home loan that allows you to borrow up to a certain percentage of the appraised value of your home. For example, if your home is appraised at $100,000 and you have a loan to value mortgage for 80%, you can borrow up to $80,000. The remaining 20% would be your down payment.
Loan to value mortgages are typically used by borrowers who don’t have a lot of money saved up for a down payment. They can also be beneficial for borrowers who are trying to avoid private mortgage insurance (PMI). PMI is insurance that protects the lender in case you default on your loan. If you have a conventional loan with less than 20% down, you’re required to pay PMI. However, if you have a loan to value mortgage for 80% or less, you may not be required to pay PMI.
If you’re thinking about getting a loan to value mortgage, there are a few things to keep in mind. First, your interest rate may be higher than it would be with a conventional loan because the lender is taking on more risk. Second, you’ll need to have good credit in order to qualify for a loan to value mortgage. And third, you’ll need to be prepared for a larger monthly payment because you’ll be borrowing more money.
Now that you know all about loan to value mortgages, it’s time to decide if one is right for you. If you’re looking for a way to finance a new home with a smaller down payment, a loan to value mortgage may be a good option. Just be sure to weigh the pros and cons before making your final decision.