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80/10/10 Loans

A piggyback loan, or an 80/10/10 loan, is a mortgage that is taken out on top of another mortgage. Although it isn’t quite as popular today as it was before the recession in 2008, when it was used to get around paying for private mortgage insurance, some people still use the 80/10/10 loan for the same purpose.

What is an 80/10/10 loan?

While the breakdown of an 80/10/10 loan doesn’t need to break down exactly at 80%, 10%, and 10%, they provide a general structure for how a borrower can avoid paying private mortgage insurance. Here is what each section of the loan covers:

  • 80% is what the initial mortgage is covering of the home’s value (it can be less than 80%, but never more).
  • 10% is the amount that the second mortgage will cover of the home’s value, which enables the borrower to avoid private mortgage insurance, despite paying a higher interest rate.
  • 10% is the amount that is required to be a down payment, but it can be lower or higher.

Benefits of an 80/10/10 loan?

There are several major benefits for getting a piggyback loan, as opposed to a FHA loan. Here are some of the benefits:

  • Borrowers are able to purchase a home with a lower down payment, which means spending less money upfront.
  • Borrowers can write off the interest from both loans on their taxes.
  • Borrowers can avoid paying for private mortgage insurance with a 10% down payments. Under a conventional loan, that amount is 20%.
  • Borrowers can also use an 80/10/10 loan to purchase a higher amount for a higher-value home, instead of getting a jumbo loan, in certain circumstances.

Who qualifies for an 80/10/10 loan?

The requirements for 80/10/10 have become more strict since the 2008 mortgage crisis, due to the added risk of lenders putting out a second loan. Piggyback loans require a high credit score. While it can vary from lender to lender, you probably want to have a credit score of at least 680.

Call our experts today, to see if you quality for an 80/10/10 loan!

For consumer support and inquiries please contact our Consumer Solutions Dept. at 1 (866) 508-5515 or by email to consumersolutions@citywidehomeloans.com.