An 80-10-10 or piggyback loan used to avoid mortgage insurance.  It is a "split" loan structure that allows a home buyer to finance 80% of the home as a 1st mortgage by borrowing 10% as a 2nd mortgage  The borrower also pays the remaining 10% as a downpayment.

With a Combo Loan, you can avoid paying mortgage insurance (increase your tax deductions - consult your tax advisor) on new home purchases and refinancing of exiting loans, as well as avoiding Jumbo pricing and Jumbo payments on Jumbo Loans.  By doing a first and a second mortgage simultaneously, means the home buyer has two loans to pay off that typically cost less than paying for PMI.  

Note: PMI is not deductible but interest on a piggyback mortgage is tax-deductible.

We offer several different Combo Loan opportunities, including:

• 100% CLTV loans (Zero Down-payment)
  80/20
  
  
• 95% CLTV loans (Home Buyer puts 5% down)
  80/15/5
  75/20/5
  
  
• 90% CLTV loans (Home Buyer puts 10% down)
  80/10/10
  75/15/10

Please visit our Mortgage Insurance page for calculations and explanations of mortgage insurance and other ways to roll MI into a loan to save you money.

Another way to structure a piggyback loan is with a Home Equity Line of Credit (HELOC) as the 2nd mortgage.

In some RARE instances, the home buyer can also finance the 10% down which results in a third lien against the property but at a much higher rate.  This is never a good idea or to the advantage of the borrower and is far more costly than paying the additional monthly mortgage insurance.

A Community Seconds for Secondary Financing Assistance may finance the downpayment for you but not many lenders allow third mortgages that (when combined with the 1st and second) equal your homes value.  Trying to finance the downpayment with a third lien is usually impossible.

As per the below example based on a $150,000 home, there are pro's and cons to this type of loan opposed to a conforming or standard conventional loan that requires paying the monthly mortgage insurance premium.  Pay close attention to interest totals.  NOTE: As a home's value rises, the owner will be able to drop PMI sooner; the below calculations do not take this into consideration.

Using an example of a home financed at $150,000:

Piggyback Loan $150,000	Conventional 1st Mortgage $150,000
80% or $120,000 1st mortgage at 6% = $719.46	97% or $145,500 Financed at 6% = $872.35
10% or $15,000 2nd mortgage at 11% = $142.85	Mortgage Insurance = $109.13
downpayment of 10% or $15,000	downpayment of 3% or $4,500.00
Total combined monthly payment  = $862.31	Total combined monthly payment  = $981.48

Conventional Mortgage PMI breakdown:
(provided real-estate values don't appreciate)

$145,500 loan with PMI at $109.13 lasts 3yr 9 mo (45 mo)
$4,910.85 in mortgage insurance
until home value realizes 5% equity or paid down principle to $138,225 
Total Mortgage payment $$981.48

From $138,225 to $130,950, PMI is $94.58 a mo. (81st mo) (next 3yrs 7mo) 
$3,404.88 in mortgage insurance until home value realizes 10% equity
Total Mortgage payment $966.93

From $130,950 to $123,675, PMI is $63.05 a mo. (112th mo) (next 2yrs 7mo) 
$1,954.55 in mortgage insurance until home value realizes 15% equity
Total Mortgage payment $935.18

From $123,675 to $116,400, PMI is $38.80 a mo. (139th mo) (next 2yrs 3mo) 
$1,047.60 in mortgage insurance until home value realizes 20% equity
Total Mortgage payment $911.15

From here on....The Conventional 1st Mortgage payments will be $872.35 


30 years Cumulative Total on $150,000 1st mortgage: 
Principal=$145,500.00   Interest=$168,544.57   PI=$314,044.57
  +
     $4,500.00 (3% down) = $150,000.00  Principal (PI=$318,544.57)
  +
    11.6 years of PMI = $11,317.88
New PI+PMI = Grand Total of $329,862.45

As you will note below, the piggyback loan saves $4,431.16 over the mortgage term and frees up $119.17 a month initially than only $10.04 a month after 11.6 years.  You will also note that the down-payment for the piggyback/combo loan is $10,500 more than the conventional 30yr mortgage down-payment.  It is important to compare interest savings in having the conventional loan opposed to the extra money lost to interest by the piggy-back loan, while keeping in mind that interest is tax deductible.  Conventional 30 year financing saves you $6,886.72 which is applied toward principle.

The Piggyback Loan breakdown:

30 years Cumulative Total on $120,000 1st mortgage:
Principal=$120,000.00   Interest=$139,005.83  PI=$259,005.83
  +
30 years Cumulative Total on 2nd mortgage:
Principal=$15,000.00   Interest=$36,425.46  PI=$51,425.46
  =
Combined Total: Principal=$135,000.00   Interest=$175,431.29   PI=$310,431.29
  +
$15,000 downpayment added to above Principal=$135,000.00 = 150,000 in Principal
New PI Grand Total of $325,431.29

As you will see on our Mortgage Insurance page example, PMI for a Conventional 30 year fixed-rate mortgage of $150,000 (used for the 80-10-10 piggyback example) has no upfront fee, just a monthly fee of $112.50 that is reduced after the first 2% in equity is earned and then further reduced for every 5% in equity earned thereafter until equity equals 20 - 22%.