80-10-10 Mortgage

AAA

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

    A debt instrument, secured by the collateral of specified real ...
  3. Junior Mortgage

    A mortgage that is subordinate to a first or prior (senior) mortgage. ...
  4. Conventional Mortgage

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

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

    A type of subordinate mortgage made while an original mortgage ...
Related Articles
  1. 6 Reasons To Avoid Private Mortgage ...
    Home & Auto

    6 Reasons To Avoid Private Mortgage ...

  2. Tax Deductions On Mortgage Interest
    Taxes

    Tax Deductions On Mortgage Interest

  3. 4 Steps To Attaining A Mortgage
    Credit & Loans

    4 Steps To Attaining A Mortgage

  4. Understanding The Mortgage Payment Structure
    Credit & Loans

    Understanding The Mortgage Payment Structure

comments powered by Disqus
Hot Definitions
  1. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  2. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  5. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  6. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
Trading Center