80 10 10 Mortgage Loan
An 80-10-10 mortgage loan allows you to avoid having to pay private mortgage insurance. You takeout a standard first mortgage for 80% of the price, put 10% down, and then take out a secondmortgage for the remaining 10%.
There are a couple of places to get the second mortgage for the remaining 10%.
Sometimes a seller may be willing to offer qualified buyers secondary financing ata good rates. Often times, seller financing will have a lower interest rate thanthose by a traditional lending institution. Also may sellers will not chargeloan origination fees. However, most seller financing loans tend to be balloonloans, 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 reviewthe terms of the seller financing, to ensure you are not overextending yourself.
The lending institution that provided your mortgage for the 80% part, may alsobe able to finance the remaining 10%. Some make the second loan as a homeequity loan, while others make it a standard second mortgage. The loan, dependingon the lender, might be in the form of a balloon loan, so be sure to ask if thisis the case.
The breakdown of 80-10-10 is not set in stone. Other breakdowns such as 80-15-5are also possible, however the lower the down payment the higher the interestrate, and origination fees will likely be. Some institutions may offer 80-20-0financing, that is no down payment required. However, this type of loan is usuallyonly made to individuals with near perfect credit ratings, and often requirean easily accessible source of cash as a reserve.
The 80-10-10 loan can help you avoid paying PMI, since loan interest is oftentax deductible this could help you save money. However, it is important toremember that the secondary financing often comes in the form of a balloonloan that is due in a relatively short period of time.
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