80-10-10/80-15-5
 ith an 80-10-10, you get a mortgage for 80% of the purchase price, put 10% down and borrow the remaining 10%. That second loan is called a "piggy back loan."
This is one of the more popular ways around making a 20% down payment.
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80% - Mortgage
10% - Down payment
10% - Second loan/Piggy back loan |
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| Lenders are willing to lend you 80% of the amount if you can come up with the 20% down payment. |
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| If you can't put that much down, they may lend you 90%, but they are taking a greater risk and therefore require you to pay a higher interest rate. |
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| Rather than just giving you a loan for 90% of the amount at a slightly higher rate, you could get two loans. The first loan is for 80% at a standard rate, and the second (piggy back) loan is for 10%, and it has a much higher rate (often more than two points higher than the 80% loan). |
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| The second loan is usually a balloon loan, with the balloon payment due within the first 10 years of the loan. |
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| 75-15-10 |
| If you're borrowing less than $240,000 (conforming loan) on the first loan, you might want to consider a 75-15-10. It offers a conforming rate rather than the jumbo rate you automatically get with an 80-10-10. |
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| Qualifying |
| To get these mortgages you have to qualify for the payments on both the mortgage and the piggy back loan. This may not be an option if you have to stretch to buy the home. |
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| Applying |
| Since many lenders don't offer these loans, your best bet is to use a mortgage banker who works with multiple lenders in your area. |
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| At Guaranty, you pay a low commission and a processing fee on both the 80% loan and the piggy back loan. |
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| PMI vs. 80-10-10 or 80-15-5 |
| Most borrowers are taught to avoid private mortgage insurance (PMI) at any cost. Paying high interest, however, isn't much better than paying for insurance. |
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| You need to make sure that you would actually save money with an 80-10-10 or 80-15-5. The high interest rate may end up costing more than your insurance premiums. |
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| We recommend getting a quote for both. You can then compare the monthly interest on the 10% or 15% loan to your monthly mortgage insurance premium. |
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