80-10-10 MORTGAGE
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A ‘piggyback’ structure using an 80% first mortgage, 10% second mortgage, and 10% down payment to avoid PMI.
Summary
An 80-10-10 mortgage is a strategic financing arrangement where a homebuyer uses two separate loans plus a down payment to purchase a home while avoiding private mortgage insurance (PMI). The buyer takes out a primary mortgage for 80% of the home's value, a second mortgage (often called a 'piggyback loan') for 10%, and makes a 10% cash down payment. This structure keeps the primary loan at exactly 80% loan-to-value ratio, which is the threshold below which lenders typically don't require PMI. It's called a 'piggyback' because the second mortgage 'rides on the back' of the first mortgage.
Usage Context
This term is crucial when studying alternative financing strategies, PMI avoidance techniques, and creative financing solutions for homebuyers with limited down payment funds but good credit profiles.
Common Confusions
- Thinking the 10% second mortgage has the same terms as the first mortgage
- Believing this eliminates all mortgage insurance (it only eliminates PMI on the first loan)
- Assuming this is always cheaper than paying PMI
- Confusing this with a single mortgage for 90% of the home value
- Not understanding that you're making two separate monthly payments
