Appeal of piggyback loans fades for home buyers
| Home buyers may now need to pull out their calculators when tackling a common dilemma: what to do if they don’t have enough money for a 20 percent down payment. In recent years, piggyback loans, low-cost and easy to get, have been the product of choice for many cash-strapped consumers eager to purchase homes. But with short-term interest rates now sharply higher — currently above 8 percent — piggyback loans are less appealing. Now, there are signs that some borrowers are giving traditional private mortgage insurance a second look. |
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New federal tax legislation expected to be signed by President Bush Wednesday gives some consumers even more reason to turn to mortgage insurance. The new law makes the insurance premiums tax deductible for some borrowers who take out new mortgage-insurance contracts in 2007. That is in addition to the tax deduction homeowners can already take on the mortgage interest they pay. What’s more, new guidelines issued recently by bank regulators could make it tougher for some borrowers to get piggyback loans, particularly if these are paired with exotic types of mortgages that may increase risk. Some lenders have already seen higher delinquencies on piggyback mortgages.
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