With an 80-10-10 loan, you take out a primary mortgage for 80% of your purchase price and a second mortgage for another 10%, while making a 10% down payment. The result: You get into the home you love without having to pay extra for private mortgage insurance (PMI).
80 10 10 Loans for Today's Home Buyer
The buyer puts just 10% down. This loan type is also known as a piggyback mortgage. It is popular because it helps buyers avoid private mortgage insurance while making a down payment of less than 20%.
When a borrower cannot come up with 20% down, an 80/20 loan is usually the best route to go, because it is less expensive than having to carry PMI. The 20% loan will generally carry a higher interest rate than the first trust deed loan, so it is important to carefully manage finances.
Sometimes called a “piggyback loan,” an 80-10-10 loan lets you buy a home with two loans that cover 90% of the home price. One loan covers 80% of the home price, and the other loan covers a 10% down payment. Combined with your savings for a 10% down payment, this type of loan can help you avoid PMI.
For the right home buyer, a piggyback loan can be a great idea. ... And the second loan — usually a home equity line of credit — will usually come with higher interest rates than the first mortgage. If a piggyback loan doesn't sound right for you, there are other low-down-payment loans to consider.
With an 80-10-10 loan, you take out a primary mortgage for 80% of your purchase price and a second mortgage for another 10%, while making a 10% down payment. The result: You get into the home you love without having to pay extra for private mortgage insurance (PMI).
It is absolutely ok to put 10 percent down on a house. In fact, first-time buyers put down 7 percent on average. Just note that with 10 percent down, you'll have a higher monthly payment than if you'd put 20 percent down.
To sum up, when it comes to PMI, if you have less than 20% of the sales price or value of a home to use as a down payment, you have two basic options: Use a "stand-alone" first mortgage and pay PMI until the LTV of the mortgage reaches 78%, at which point the PMI can be eliminated.
You can combine the two loans into one mortgage or you refinance the 80 percent or 20 percent portion. When refinancing one loan portion, you may be required to pay mortgage insurance, if the new loan exceeds 80 percent of the value of the home.
An 80/20 mortgage can save money on the front end of your home loan and over the course of the loan. Essentially, an 80/20 mortgage is a pair of loans used to purchase a home. The first loan covers 80 percent of the home's price, while the second covers the remaining 20 percent.
With an "80-10-10" piggyback mortgage, for example, 80% of the purchase price is covered by the first mortgage, 10% is covered by the second loan, and the final 10% is covered by your down payment. This lowers the loan-to-value (LTV) of the first mortgage to under 80%, eliminating the need for PMI.
Or Pay with Points
The lender may still take out a policy. ... Putting 10% down and financing 90% of your purchase means bigger monthly mortgage payments. It also means you will have to pay PMI. If you ask your lender to pay your PMI it could end up being more expensive because of the higher interest rate.
Credit score is used to determine PMI eligibility, price
Insurers, like mortgage lenders, look at your credit score when determining your PMI eligibility and cost.
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