80 10 10 Mortgage Loan

An 80-10-10 mortgage loan allows you to avoid having to pay private mortgage insurance. You take out a standard first mortgage for 80% of the price, put 10% down, and then take out a second mortgage for the remaining 10%.

There are a couple of places to get the second mortgage for the remaining 10%.

Seller Financing
Sometimes a seller may be willing to offer qualified buyers secondary financing at a good rates. Often times, seller financing will have a lower interest rate than those by a traditional lending institution. Also may sellers will not charge loan origination fees. However, most seller financing loans tend to be balloon loans, that are due in a relatively short period of time such as 3-5 years. The lending institution that has the first mortgage will likely want to review the terms of the seller financing, to ensure you are not overextending yourself.

Lending Institutions
The lending institution that provided your mortgage for the 80% part, may also be able to finance the remaining 10%. Some make the second loan as a home equity loan, while others make it a standard second mortgage. The loan, depending on the lender, might be in the form of a balloon loan, so be sure to ask if this is the case.

The breakdown of 80-10-10 is not set in stone. Other breakdowns such as 80-15-5 are also possible, however the lower the down payment the higher the interest rate, and origination fees will likely be. Some institutions may offer 80-20-0 financing, that is no down payment required. However, this type of loan is usually only made to individuals with near perfect credit ratings, and often require an easily accessible source of cash as a reserve.

The 80-10-10 loan can help you avoid paying PMI, since loan interest is often tax deductible this could help you save money. However, it is important to remember that the secondary financing often comes in the form of a balloon loan that is due in a relatively short period of time.

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