We have an 80/20 loan. The 20 is a balloon that
has a balance due after 20 years. We've had our
house for about two years. Is it possible to take
out a home equity loan now and pay off the 20
loan so that our money is going toward the loan
and there will be no balance due at the end of
I appreciate your time,
-- Amanda Abridger
You mortgage financing structure is what's known
as a piggyback loan. The first mortgage is an
80 percent loan-to-value so you aren't required
to carry private mortgage insurance, or PMI, on
the mortgage. The second mortgage finances the
balance, less any down payment you made on the
purchase. In your case, with an 80/20 loan, that
means that you didn't have an equity stake in
the home at closing.
There already is a second mortgage on the property. It just has a balloon payment after 20 years instead of having amortized payments over that time period.
Depending on what's going on in your local real estate market, you may not be able to refinance the existing second into a new, amortizing loan. I'm not sure you need to just yet.
You can work out your own repayment schedule and make additional
principal payments each month on the second mortgage
and accomplish the same result as you could with
a refinancing. Why not try that for a while?
Use Bankrate's mortgage
payment calculator to solve for what it would
take to pay off the loan in the remaining 18 years,
using the interest rate and the loan balance.
It won't be perfect, since your current second
is likely to be an adjustable-rate loan, but it'll
be close enough to get started.