The 80-10-10 Loan Unraveled: A Comprehensive Guide to Crack the Code of Home Financing
November 20, 2023
Today's discussion will center on one such intriguing option known as the 80-10-10 loan. We'll explore its core, how it works, and any necessary requirements. Let's decipher this cryptic financial tool and see if it suits your home financing plan.
What is the 80-10-10 combination loan?
The 80-10-10 loan, also known as a piggyback loan, might sound puzzling at first glance, but its name essentially explains the structure. This loan arrangement involves two loans and one down payment. It's a combination loan where you borrow.
- The first loan makes up 80% of the home's purchase price; this is the primary mortgage and typically has the lowest interest rate.
- The second loan covers an additional 10% of the price; this is the secondary mortgage home equity loan or line of credit, usually with a slightly higher interest rate.
- 10% is the homebuyer's down payment.
Avoid costly Private Mortgage Insurance (PMI) with this clever financing strategy for low down payments on conventional mortgages.
How do 80-10-10 Loans Work?
A homebuyer can buy a property with an 80-10-10 loan without a 20% down payment or PMI.
- The homebuyer applies for the first mortgage for 80% of the home's price.
- Concurrently, they seek a second loan to cover another 10% of the price.
- The homebuyer then pays the remaining 10% as a down payment.
This strategy allows buyers to qualify for a higher loan amount since the second loan reduces the amount of money needed upfront.
What is the 80-10-10 piggyback loan ratio?
Typically, the 80-10-10 mortgage loan dilutes the pithy jargon into a more decipherable term known as a piggyback mortgage. When buying a house, you get two loans expressed as percentages of the total cost.
First mortgage: 80% coverage, 80% LTV ratio. 10% down payment = 10% LTV ratio for second mortgage. Consequently, this unique financing strategy ensures you secure your dream home with a lower down payment while outwitting the typically steep private mortgage insurance (PMI) costs.
Comments
This is amazing information. It is important to know these details when taking home loan or a auto loan or a car loan. The mortgage info when loan is taken very helpful
This is amazing information. It is important to know these details when taking home loan or a auto loan or a car loan. The mortgage info when loan is taken very helpful
This is amazing information. It is important to know these details when taking home loan or a auto loan or a car loan. The mortgage info when loan is taken very helpful