80-10-10

An 80-10-10 loan -also commonly referred to as a "Piggyback Loan"- is a creative financing method designed to avoid paying private mortgage insurance (PMI). Mortgage insurance premiums are expensive and, unlike mortgage interest, NOT tax deductible. Mortgage insurance is required if the buyer's down payment is less than 20% of the sales price or appraised value of the home. Buyers get around this by doing an 80-10-10 loan. In an 80-10-10, the buyer takes out a primary mortgage for 80% LTV (loan to value ratio), a second mortgage (this is the "piggyback" notion) for 10% LTV, and places a down payment of 10%. Typically the second mortgage will have a slightly higher interest rate than the primary mortgage.