If you’ve been eyeing your dream home but don’t have 20% saved for a down payment, lenders will usually slap you with Private Mortgage Insurance (PMI). It protects them, not you. That monthly charge? Pure cost with no equity return.
Here’s the good news: There’s a workaround. It's called an 80-10-10 mortgage, and it’s how savvy buyers avoid PMI, even with just 10% down.
Key Takeaways:
- 80-10-10 mortgages split your home loan into 80% primary mortgage, 10% second mortgage, and 10% down payment.
- Helps you avoid PMI while still putting less than 20% down.
- Ideal for high-income buyers who want to keep more cash liquid.
- May result in higher second loan rates, but overall savings often outweigh costs.
- Best suited for those with strong credit scores (typically 700+).
Let’s explain how it works—and why it might be the smartest strategy in today’s competitive housing market.
What Is an 80-10-10 Mortgage?
An 80-10-10 mortgage is a home financing structure that lets you avoid PMI by splitting your loan into three parts:
- 80%: First mortgage
- 10%: Second mortgage (often a HELOC or fixed-rate loan)
- 10%: Down payment from you
Why This Structure Matters:
An 80-10-10 loan isn’t just clever math—it’s a smart strategy to boost affordability and avoid extra costs. Here’s what it helps you do:
- Avoid PMI: You keep your first mortgage under the 80% loan-to-value (LTV) threshold.
- Lower upfront cash: Only 10% down needed.
- Flexibility: Second mortgages often offer interest-only or flexible repayment options.
- Tax perks: You may be able to deduct interest (check with a tax professional).
Pro Tip: Always compare the combined payments of both loans to a single loan with PMI. In many cases, you come out ahead.
Who Should Consider an 80-10-10 Loan?
80-10-10 loans are a great fit if:
- You have a strong credit score (700+)
- You’re buying in a high-cost housing market
- You want to keep more cash available for renovations, investments, or reserves
- You’re a high-income earner without a full 20% saved
It gives you the power to act fast without over-leveraging.
80-10-10 vs. Traditional Loan With PMI
| Feature | 80-10-10 Mortgage | Traditional 90% Loan + PMI |
|---|
| Down Payment | 10% | 10% |
| PMI Required | ❌ No | ✅ Yes |
| Second Loan Payment | ✅ Yes | ❌ No |
| Equity Built Faster? | ✅ Often | ❌ Slower |
| Monthly Payment (Typical) | Slightly Higher | Lower upfront, PMI adds cost |
Heads Up: The second loan might carry a higher interest rate, but when PMI is removed, your total monthly cost may still be lower.
Real-World Use Case: High-Earner, Low-Cash Buyer
Imagine this:
- You’re buying a $500,000 home
- You have $50,000 (10%) saved for the down payment
- You take out:
- $400,000 (80%) primary loan
- $50,000 (10%) second loan
You skip PMI, maintain liquidity, and build equity on your terms.
Many buyers in fast-moving markets use this to stay competitive without compromising cash reserves.
What to Watch Out For?
- Second loan terms can be less favorable (watch for interest-only or balloon payments)
- Qualification standards are higher (credit score, income)
- Rates vary across lenders—comparison shopping is essential.
Use calculators and speak with licensed mortgage professionals to assess your options.
Ready to Explore Your 80-10-10 Options?
Start by comparing lenders that offer second mortgages or HELOCs in conjunction with traditional first mortgages.
You can also check out Be My Neighbor (NMLS #1743790) for mortgage guidance tailored to your goals.
And if you’re still house hunting, reAlpha offers a commission-free home buying platform, designed to help you maximize value and minimize cost.
Together, we empower you to buy smarter—and save more.
Compliance Notice
Mortgage products are subject to credit and underwriting approval. Not all borrowers will qualify. Rates and terms are subject to change without notice. This blog is for informational purposes only and should not be considered financial or tax advice. Always consult licensed professionals before making any loan decision.
FAQs
What credit score do I need for an 80-10-10 mortgage?
Typically, you’ll need a minimum credit score of 700 to qualify for the second mortgage portion.
Is PMI completely avoided with an 80-10-10 loan?
Yes. Because the primary mortgage is 80% or less of the home’s value, PMI is not required.
Can first-time buyers use this structure?
Absolutely, as long as you meet the credit and income requirements.
Are interest rates higher on the second loan?
Often yes. But overall, savings from PMI avoidance can still make it worthwhile.
Where can I compare 80-10-10 mortgage rates?
Start with Be My Neighbor or other licensed brokers. For home searches, visit reAlpha.
Want to skip PMI and keep your cash liquid? Explore the 80-10-10 route with expert guidance from Be My Neighbor and commission-free buying on reAlpha.
You don’t have to compromise. You just need a smarter strategy.
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