A 1080 Mortgage???

Question

Can anyone please explain to me exactly what a 1080 mortgage is and whether it's a good mortgage to get into or not?

Thanks for the answers.

Answer 1

To expand on the earlier answer...

The 80-10-10, or piggyback loan, does not eliminate private mortgage insurance. Rather, it shifts the burden to the lender, who will purchase the policy. Where does the lender get the money to purchase the policy? From charging the borrower a higher rate.

In the past year, the picture has changed from piggybacks being the best deal to MI being the better choice. First, performance on the piggybacks has not been good. In other words, lenders found they were losing money on these loans, so they tightened underwriting standards and increased rates. Second, MI became tax-deductible under most circumstances.

So, which is best for you? To answer that, you need to shop around to at least three loan originators. Ask each to run your loan as a piggyback, as a full 90% LTV "without MI," (which really means lender-paid MI), and as a 90% with you paying MI.

As for you paying the MI, there are a few choices. Ask for both monthly and single-premium financed plans. Your loan originator should know all these terms and be able to explain each loan type in detail. You can also ask the seller to pay the full premium at close. Seller paid MI is less expensive than financed.

Answer 2

You put down 10%. You take out a first mortgage for 80% and a second for 10%.

This is sometimes used to avoid paying PMI but is usually a false economy since PMI can be removed once your loan to value on the first mortgage drops below 80%. With the second, you'd need to refinance the whole package to get rid of the higher rate you're paying on the second mortgage.