If you don’t have 20% down but want to avoid paying private mortgage insurance (PMI), an 80-10-10 loan may be the right strategy. Also known as a piggyback or combination loan, it involves three parts:
- 80% first mortgage
- 10% second mortgage (home equity loan or HELOC)
- 10% down payment from you
Understanding how these work can help you decide if this is the best move for your homebuying goals. If you’re comparing loan options, check out Jackie’s guide to Conventional Loans and FHA Home Loans too.
How an 80-10-10 Loan Works
This option splits your financing into two mortgages:
1. First Mortgage: 80% of the Purchase Price
Most borrowers choose a fixed-rate loan for long-term payment stability. An adjustable-rate mortgage (ARM) is possible but can increase later.
2. Second Mortgage: 10% of the Purchase Price
You have two common choices:
- Home Equity Loan – Lump sum, fixed interest rate, predictable payments.
- HELOC – Withdraw funds as needed, usually variable rate, interest-only payments during the draw period may be allowed.
3. Down Payment: 10% Cash
You can still use gift funds with documentation, just like any other mortgage program.
How It Helps You Avoid PMI
PMI is required when you put less than 20% down on a conventional loan. With an 80-10-10 loan, you’re still making a 20% down payment — just with a second mortgage covering half of it.
That allows you to eliminate the added PMI cost and keep your monthly payment lower.
Learn more about how mortgage pricing works here: First-Time Buyer Plan.
80-10-10 Mortgage Pros and Cons
Pros
- No PMI required
- May avoid high-cost jumbo loans
- Second mortgage can be paid off early
- More cash remains in your bank account
- Interest on both loans may be tax deductible (ask your tax advisor)
Cons
- Two mortgage payments to manage each month
- Second mortgage typically carries a higher interest rate
- HELOC rates are usually variable and may increase
- Two sets of closing costs if different lenders are used
- First mortgage rate may be slightly higher than a standard loan
Qualification Requirements
Applying for two loans means you must meet dual qualification standards. Key criteria include:
- Credit Score: 620 minimum for the first mortgage, often 660–680 for the second
- Debt-to-Income (DTI): Lower limits, often 43% or below
- Assets: Enough money to cover two sets of closing costs if different lenders are used
We evaluate both loan approvals together to ensure a smooth closing experience.
Example of an 80-10-10 Loan
Purchase price: $350,000
- 1st mortgage (80%): $280,000
- 2nd mortgage (10%): $35,000
- Down payment (10%): $35,000
This structure reaches the full 20% and avoids PMI — even though only half was from your own funds.
Who Should Consider an 80-10-10 Loan?
This strategy is worth exploring if:
- You want to avoid PMI ($30–$70 per $100,000 borrowed)
- You want to stay under conforming loan limits to avoid a jumbo loan
- You need temporary financing until your current home sells
- You want to keep more cash available for repairs or saving
It’s a flexible way to buy sooner without draining your emergency fund.
80-10-10 vs. Bridge Loans
80-10-10 loans: Long-term structure used to avoid PMI and jumbo loans.
Bridge loans: Short-term financing (6–12 months) tapped from current equity to buy before selling.
If you’re relocating or timing a move with a sale, ask about ARM options and timing strategies too.
Alternatives to an 80-10-10 Loan
- FHA Loans — as low as 3.5% down, but long-term mortgage insurance
- VA Loans — no down payment for eligible borrowers, no PMI
- Down payment assistance — may help you reach 20% faster
If none of these options are right today, waiting while you save a larger down payment is still a smart path.
Is an 80-10-10 Loan Right for You?
It depends on your credit, debt, and long-term financial plan. The advantages are real — especially for buyers who want to avoid jumbo pricing or PMI — but it’s important to review the numbers with an expert.
If you’re thinking about this approach, schedule a quick call with Jackie to compare your options side by side. She’ll show you how this program stacks up next to FHA, VA, and low-down-payment conventional loans so you can make a confident decision.
Start here: Talk with Jackie Today
