The 80 10 10 Mortgage
The 80 10 10 Mortgage is the best mortgage in the industry for buyers who can put 10% down, since this product has the least expensive total mortgage payment given the lack of mortgage insurance. Most banks that do not offer the 80 10 10 Mortgage charge the customer several hundred dollars a month in insurance if the customers down payment is less the 20%.
The Details of the 80 10 10 Mortgage
The 80 10 10 Mortgage is quite simple. We split the need for 90% financing into two loans, one for 80% and one for 10%. Since the first trust loan is at or below 80%, no insurance is required. What type of loans are they you ask? Good question! Think of each loan as two separate structures. The first trust loan for 80% is just like any other mortgage. You can choose a Fixed (30, 20, 15, or 10 Year) or Adjustable Rate Mortgage (aka ARM) for the first mortgage. You can choose a Fixed or a Line of Credit for the 10% portion.
Here is an example of how the 80 10 10 Mortgage can save you hundreds. The example is based on a $600,000 sales price and only includes the loan payment (no home owners insurance or taxes) for comparison purposes.
*I know the above picture is hard to read, but it was necessary to provide enough information for the reader to make a sound decision based on comparing a straight 90% loan with PMI to our 80-10-10 Mortgage.
Other Benefits of the 80 10 10 Mortgage
- Tax Deductible - The interest from both loans on the 80 10 10 Mortgage are tax deductible, unlike using one loan with mortgage insurance, which is only tax deductible up to an income of $109,000.
- HELOC is revolving - Should you choose the Line of Credit versus the fixed rate 2nd loan on the 80 10 10 Mortgage, you can use it as a cash flow tool. In the example above, the HELOC loan amount is $60,000 with a payment of $215.26. Should you have the ability to pay the balace from $60,000 to $30,000, your payment would reduce to $107.63 the next month after the paydown. Since the HELOC is revolving just like a credit card, you have access to the funds up to the original credit limit, in this case $60,000. Those who pay their taxes quartly, can do so through accessing the available credit up to the limit, and the interest on the HELOC is still tax deductible.
- Avoid Jumbo Rates - The 80 10 10 Mortgage allows a borrower to keep the first trust mortgage conforming at $417,000 or $625,000 (in high cost states) using a comination 80 10 10 mortgage to avoid bank held jumbo rates and restrictive Jumbo guidelines. In the Washington, DC metro area, our maximum first trust is $625,500, if you want to take advantage of lower conforming rates. You can use our fixed second trust loan or line of credit second trust loan to fund an additional $500,000. Therefore, you can put 10% down on a purchase price of $1,250,000 and pay no PMI!
Call me direct at 202.997.4411 or Brad.Troendle@PNC.com for more information or to apply for the 80 10 10 Mortgage.