Scott Storace - Branch Manager, 100 Pacifica Drive Ste. 140, Irvine CA 92618 NMLS #226339 949.973.0141

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Is An 80-10-10 Mortgage Right For You?

Saving With an 80-10-10

Saving With an 80-10-10

Orange County, CA – Many people think that the 80-10-10 mortgage or the piggy-back mortgage is a thing of the past. True, it was a common option a few years ago. Prior to the mortgage crisis, plenty of people took this loan option to avoid paying mortgage insurance. These days, you’ll find it a lot harder to find an 80-10-10 mortgage, but that doesn’t mean they aren’t out there. The question is, if you track one down, will it be the right option for you?

Firstly, if you are short of the standard 20% deposit for your home, lenders will most likely expect you to pay PMI. PMI is required when any one loan is greater than 80% of the value. PMI is an insurance policy which actually protects the lender rather than yourself. If your house goes into foreclosure and the value has dropped, PMI is something that the lender can fall back on. The problem of course, is that YOU have to pay the PMI premium. A larger down payment would help you to avoid this premium.

This is where the 80-10-10 mortgage comes in. Even if you only have 10% of the capital needed to buy the property, you can take out an 80% mortgage and get a 2nd loan for the remaining 10%. No one loan is greater than 80%. Therefore you avoid paying the PMI.

Other than avoiding PMI, there are other obvious advantages to this mortgage strategy. You can often buy a larger home. Or you can often secure a lower monthly repayment plan. The final advantage is that the initial investment is nominal.

You absolutely need good credit to be able to take advantage of an 80-10-10 loan and you’re likely to pay a higher interest rate for the privilege. You also need to investigate whether or not you will be entitled to full tax benefit. Why? The interest on the second mortgage is only deductible for the portion of the loan that sits under $100,000. A large second mortgage may mean a lower tax benefit.

As with all mortgage plans, it’s important to speak to a broker for advice. We’re here to help you find the best mortgage for your circumstances. So speak to us today about 80-10-10 mortgages or any other mortgage product you think might work for you!

Scott Storace

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