Presented below is one of the ways our 80/10/10 loan program can save your buyers money over a loan with mortgage insurance:
$450,000 Property
Option 1: 90% First Loan 5.25%, Monthly Mortgage Insurance %0.62, 10% Down payment
First Loan P/I: $2,236
Mortgage Insurance: $209
Total P/I Payment: $2,445
Disadvantages:
- Mortgage insurance companies require separate underwriting on-top of the standard bank underwriting. Therefore, loans may meet bank underwriting guidelines but may not meet MI underwriting guidelines.
- Separate underwriting delays loan processing and closing.
- Mortgage insurance is only tax deductible for households with income below $100,000 completely phasing out after incomes reach $109,000.
- Borrower may need to pay MI for approximately 9 years until the LTV is 78%.
- MI is costing borrower in Option 1 $2,511 per year, likely not tax deductible.
Option 2: 80% First Loan 5.25%, 10% Second Loan 6.99%, 10% Down payment
First Loan P/I: $1,988
Second Loan P/I: $404
Total P/I Payment: $2,392
Advantages:
- Payment is $53 per month lower than loan with MI.
- Second loan is a fixed rate, fully paid off in 15 years.
- Borrowers can pay additional principal on the second loan with no penalty.
- Once second loan is paid off, monthly payment automatically drops to $1,988 without a refinance.
- Second loan interest is tax deductible.
Net Benefit of 80/10/10 Loan in Year 1:
First Year Cost of Option 1: $2,511 for MI
First Year Cost of Option 2: $221 due to interest on the second loan
Net Savings with an 80/10/10: $2,290 in the first year
Net Benefit of 80/10/10 Loan in Year 8:
8th Year Cost of Option 1: $20,088 for MI
8th Year Benefit of Option 2: Savings of $1,053 due to less interest paid
Net 8th Year Savings with an 80/10/10: $21,141 after the 8th year
Net Benefit of 80/10/10 Loan in Year 15:
15th Year Cost of Option 1: $21,760 for MI
15th Year Benefit of Option 2: Savings of $9,688 due to less interest paid
Net 15th Year Savings with an 80/10/10: $31,448 after the 15th year
Net Benefit of 80/10/10 Over 30 Years:
30th Year Cost of Option 1: $409,990 interest plus $21,760 for MI
30th Year Cost of Option 2: $383,418 total interest Net
30th Year Savings with an 80/10/10: $48,332 over the life of loan!
This is just one of the ways we can structure an 80/10/10 for your benefit.
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