80-10-10 Mortgage

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DEFINITION of '80-10-10 Mortgage'

A mortgage transaction in which a first and second mortgage are simultaneously originated. The first position lien has an 80% loan-to-value ratio, the second position lien has a 10% loan-to-value ratio and the borrower makes a 10% down payment. 80-10-10 mortgage transactions are piggy-back mortgage transactions, and are frequently used by borrowers to avoid paying private mortgage insurance.

INVESTOPEDIA EXPLAINS '80-10-10 Mortgage'

The economics of using a second lien rather than paying private mortgage insurance are driven by home price appreciation. If a borrower expects the value of the home to increase quickly, it might be more economical to pay private mortgage insurance for a period of time until the loan-to-value ratio for a first mortgage falls below the minimum required. At this point, the private mortgage insurance can be eliminated, eliminating the need for a second mortgage in a piggy-back transaction.

RELATED TERMS
  1. Private Mortgage Insurance - PMI

    A policy provided by private mortgage insurers to protect lenders ...
  2. Mortgage

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  3. Lien

    The legal right of a creditor to sell the collateral property ...
  4. Second Mortgage

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  5. Junior Mortgage

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  6. Conventional Mortgage

    A type of mortgage in which the underlying terms and conditions ...
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