What is 80-10-10 Mortgage?
A mortgage transaction in which a first and second mortgage are simultaneously originated. The first position lien has an 80% loan-to-value ratio, the second position lien has a 10% loan-to-value ratio and the borrower makes a 10% down payment. 80-10-10 mortgage transactions are piggy-back mortgage transactions, and are frequently used by borrowers to avoid paying private mortgage insurance. Read more for examples and further explanation including related video clips and also comments
Example explains 80-10-10 Mortgage
The economics of using a second lien rather than paying private mortgage insurance are driven by home price appreciation. If a borrower expects the value of the home to increase quickly, it might be more economical to pay private mortgage insurance for a period of time until the loan-to-value ratio for a first mortgage falls below the minimum required. At this point, the private mortgage insurance can be eliminated, eliminating the need for a second mortgage in a piggy-back transaction.
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