Second thoughts:As interest rates go up, homeowners rethink piggybacks

[NVMojo]

As interest rates increase, many homeowners must rethink financing choices

September 23, 2006

Not so long ago, you had to save enough cash for a down payment to purchase a home. Not anymore.

One of the byproducts of the frenzied pace and appreciation that marked the previous real estate cycle was a proliferation of "piggyback" loans. The new loan products effectively enable buyers to finance a down payment via a line of credit or home equity loan, typically tied to an adjustable rate which follows a brief fixed-term.

Some of those piggybackers - namely those unprepared for the ramifications of a slowing housing market coupled with newly adjusting rates - are beginning to find themselves without a financial leg to stand on.

Piggyback loans, so-called because a second mortgage is tacked on to the first, became increasingly popular in California as home prices skyrocketed and buyers were less and less able to produce down payments. They are often referred to as 80/20 loans or 100 percent financing, depending on their structure.

more...

http://www.thereporter.com/business/ci_4386605

[Rosemary2205]

1. If people just refused to buy a house they can't afford

the loan sharks and real estate flippers would be forced to keep the market where people can actually afford to live.

[NVMojo]

2. yeah, imagine that! paying the true value of a house ...instead of

a bloated value.

[AnneD]

3. This is probably why

hubby and I still rent. There isn't an affordable place for us. Using what I consider prudent guidlines....there are no decent house that are in our budget range and they keep trying to foist these McMansions on us.