What is a 80/10/10 mortgage loan?

Asked By: Jihad Llera | Last Updated: 15th April, 2020
Category: personal finance home financing
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80 10 10 Loans for Today's Home Buyer
An 80 10 10 loan is a mortgage option in which a home buyer receives a first and second mortgage simultaneously, covering 90% of the home's purchase price. It is popular because it helps buyers avoid private mortgage insurance while making a down payment of less than 20%.

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Subsequently, one may also ask, is an 80/20 mortgage a good idea?

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.

Likewise, what is an 80 15 5 mortgage loan? 80-15-5 loans, also known as “piggyback mortgages” are a great option for borrowers looking to avoid private mortgage insurance or keep their loan amounts under conforming limits. A combination of two loans, an 80-15-5 means the first mortgage is for 80% of the purchase price and the second is for 15%.

Moreover, how does a piggyback loan work?

A piggyback loan occurs when a borrower takes out two loans simultaneously: one for 80 percent of a home's value, and the other to make up for whatever cash is lacking to make up a 20 percent down payment. This is used as an alternative to private mortgage insurance.

How do you qualify for an 80/20 loan?

An 80/20 loan is when a homebuyer takes a conventional mortgage on 80 percent of a home's purchase price and a second loan for 20 percent of the price. Lenders require you to get Private Mortgage Insurance if the loan-to-value ratio of the home is higher than 80 percent.

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Can lenders waive PMI?

However, there are exceptions to the rule — research your options if you want to avoid PMI. For example, there are low down-payment, PMI-free conventional loans, such as PMI Advantage from Quicken Loans. This lender will waive PMI for borrowers with less than 20 percent down but they'll bump up your interest rate.

Do they still do 80/20 Loans?

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. Both loans are included in the closing and will require you to make two monthly mortgage payments.

How do you get an 80/10/10 Loan?

80 10 10 Loans for Today's Home Buyer
An 80 10 10 loan is a mortgage option in which a home buyer receives a first and second mortgage simultaneously, covering 90% of the home's purchase price. The buyer puts just 10% down. This loan type is also known as a piggyback mortgage.

How much is PMI on a 400k loan?

The average cost of private mortgage insurance, or PMI, for a conventional home loan ranges from 0.55% to 2.25% of the original loan amount per year, according to Genworth Mortgage Insurance, Ginnie Mae and the Urban Institute. Our calculator estimates how much you'll pay for PMI.

Is it better to pay PMI or second mortgage?


You can avoid PMI by simultaneously taking out a first and second mortgage on the home so that no one loan constitutes more than 80% of its cost. You can opt for lender-paid mortgage insurance (LMPI), though this often increases the interest rate on your mortgage.

How can I avoid PMI without 20% down?

The traditional way to avoid paying PMI on a mortgage is to take out a piggyback loan. In that event, if you can only put up 5 percent down for your mortgage, you take out a second "piggyback" mortgage for 15 percent of the loan balance, and combine them for your 20 percent down payment.

How can I get out of paying PMI?

To remove PMI, or private mortgage insurance, you must have at least 20% equity in the home. You may ask the lender to cancel PMI when you have paid down the mortgage balance to 80% of the home's original appraised value. When the balance drops to 78%, the mortgage servicer is required to eliminate PMI.

How long do you have to carry mortgage insurance?

Once you've committed to paying PMI, you'll usually have to keep it for at least two years. If your home has appreciated enough to give you 25% equity after two to five years, you can cancel the coverage. After five years, you just need 20% equity to ditch it.

Is a piggyback loan a good idea?

Because piggyback loans limit your first lien to 80 percent LTV, they can be an effective way to make a low down payment on a home while avoiding monthly private mortgage insurance (PMI) costs. For some buyers, this is their reason for using piggyback loans at all. A conventional loan at 90% loan-to-value.

Do piggyback loans still exist?


A piggyback loan remains even after you reach 20% equity, so you could still be making monthly payments on a piggyback home equity loan long after you would have been off the hook for PMI. You'll need to do some math to find out which option is better.

What does each component of the 80/10/10 Ratio represent in a split or piggyback loan?

80-10-10 loans are structured as two mortgages with a down payment. The first number always represents the primary mortgage, the middle number represents the secondary loan, and the third number represents the down payment.

Can you use two loans to buy a house?

A piggyback mortgage is when you take out two separate loans for the same home. Typically, the first mortgage is set at 80% of the home's value and the second loan is for 10%. The remaining 10% comes out of your pocket as the down payment.

What is a piggyback mortgage?

A “piggyback” second mortgage is a home equity loan or home equity line of credit (HELOC) that is made at the same time as your main mortgage. Its purpose is to allow borrowers with low down payment savings to borrow additional money in order to qualify for a main mortgage without paying for private mortgage insurance.

What is a combo loan?

A combination loan consists of two separate mortgage loans from the same lender, to the same borrower. One type of combination loan provides funding for the construction of a new home, followed by a conventional mortgage after construction is complete.

How is PMI calculated?


PMI typically costs between 0.5% to 1% of the entire loan amount on an annual basis. That means you could pay as much as $1,000 a year—or $83.33 per month—on a $100,000 loan, assuming a 1% PMI fee.

What are bridge loans used for?

Bridge loans aren't a substitute for a mortgage. They're typically used to purchase a new home before selling your current home. Each loan is short-term, designed to be repaid within 6 months to three years. And like mortgages, home equity loans, and HELOCs, bridge loans are secured by your current home as collateral.

What are interest rates today?

Today's Mortgage and Refinance Rates
Product Interest Rate APR
30-Year VA Rate 3.570% 3.740%
30-Year FHA Rate 3.430% 4.200%
30-Year Fixed Jumbo Rate 3.760% 3.850%
15-Year Fixed Jumbo Rate 3.110% 3.180%