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.

BREAKING DOWN '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. Piggyback Mortgage

    A type of mortgage where a second mortgage or home equity loan ...
  2. First Mortgage

    A mortgage in a first lien position on the property that secures ...
  3. Junior Mortgage

    A mortgage that is subordinate to a first or prior (senior) mortgage. ...
  4. Lender-Paid Private Mortgage Insurance

    Private mortgage insurance that a mortgage lender pays on behalf ...
  5. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
  6. Mortgage Insurance

    An insurance policy that protects a mortgage lender or title ...
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