80/10/10 Hybrid Mortgage
Avoid paying private mortgage insurance (PMI) without putting the full 20% down on the loan. The 80/10/10 Hybrid Mortgage breaks up the loan as follows:
- 80% of the loan is financed as a first mortgage;
- 10% of the loan is financed as a second mortgage (Home Equity);
- the final 10% comes from a cash down payment (or established equity in the home in the case of refinance), which is determined by the purchase price (or appraisal value of refinances in the case of refinance) of the home.
This mortgage option can get you into a home more quickly as you only have to save 10% of the purchase price for a down payment, vs. the traditional 20% required for most mortgages. Another big advantage is that you can finance 90% of the home loan without having to pay PMI.
Many homebuyers prefer to avoid paying PMI since it can be expensive and may not be tax deductible. This option may also free up some of your savings to be used for something other than a down payment—invest, pay off other debt, or even buy needed furniture for your new home. The 80/10/10 loan gives you more flexibility and allows you to save PMI costs.