Demystifying 80 10 10 Loan Calculators: A Complete Guide for Homebuyers

Buying a home is an exciting milestone in life. But it also involves complex financial calculations especially when it comes to securing the right mortgage. One option that homebuyers should consider is an 80 10 10 loan. But what exactly is it and how does the 80 10 10 loan calculator work? This comprehensive guide breaks it down in simple terms.

What is an 80 10 10 Loan?

An 80 10 10 loan is a type of piggyback mortgage that combines two loans

• First mortgage covering 80% of the home’s value
• Second mortgage covering 10% of the home’s value
• 10% downpayment from the buyer

For example, if you buy a $300,000 home, here is how the loan amounts would break down:

• First mortgage: $240,000 (80% of $300,000)
• Second mortgage: $30,000 (10% of $300,000)
• Downpayment: $30,000 (10% of $300,000)

So you borrow 80% plus 10%, and pay 10% as downpayment. Hence the name 80 10 10.

This loan structure allows buyers to avoid paying private mortgage insurance (PMI), which is typically required when downpayment is less than 20% of home value.

Why Choose an 80 10 10 Loan?

Here are some key benefits of 80 10 10 loans:

• Avoid PMI: The second mortgage covers the extra 10%, so you can meet the 20% threshold without PMI.

• Lower monthly payments: The combined cost of the two mortgages is usually less than paying PMI on a single larger mortgage.

• Buy more house: You can qualify for a larger loan amount compared to a traditional 20% downpayment.

• Build equity faster: With 10% down, you start building equity right away instead of paying PMI.

• Potential tax benefits: Depending on your tax situation, mortgage interest can be tax deductible.

How Does the 80 10 10 Loan Calculator Work?

An 80 10 10 loan calculator allows you to estimate your monthly payments by inputting a few key details:

• Home price
• Interest rates for first and second mortgage
• Loan terms for both mortgages (e.g. 30 years)
• Estimated property taxes, insurance, etc.

The calculator splits the total loan amount into 80% and 10% pieces. It estimates the principal & interest payments for each loan individually, then adds them together to return the total monthly payment.

Most 80 10 10 loan calculators also estimate the payment on a traditional loan with PMI for comparison. This allows you to see potential savings with the 80 10 10 structure.

Below is an example using a $300,000 home purchase:

![80 10 10 Loan Calculator Example][]

In this case, the combined 80 10 10 payment is $125/month less than the single mortgage option with PMI.

Playing around with different home prices, interest rates and loan terms can give you a clear picture of potential monthly savings.

80 10 10 Loan Requirements and Eligibility

While 80 10 10 loans offer nice benefits, they also have stricter eligibility requirements compared to traditional mortgages:

• Credit score: Minimum 680 score is recommended, some lenders may require 720+.
• Income: Strong and stable income is key, plan for thorough verification.
• Debt-to-income ratio: Max 45% total DTI including both mortgage payments.
• Loan-to-value ratio: Combined LTV for both loans shouldn’t exceed 90% of home value.
• Cash reserves: Expect to show 12-24 months of mortgage payments in liquid assets.
• Appraisal: Home must appraise for purchase price to validate market value.

Meeting these requirements demonstrates you can manage the larger total debt load. Shop lenders to find one with ideal eligibility criteria.

Government-backed loans like FHA and VA don’t allow 80 10 10 structures. You need a conventional loan which follows Fannie Mae or Freddie Mac guidelines. Jumbo loans also commonly permit 80 10 10 mortgages.

Pros and Cons of 80 10 10 Loans

As with any mortgage, weigh the tradeoffs of an 80 10 10 to decide if it’s right for you:

Pros

• Lower monthly payments without PMI
• Buy more expensive houses
• Build equity faster
• Potential tax benefits

Cons

• Stricter eligibility requirements
• Higher total monthly debt obligations
• Second mortgage may have variable rate
• Closing costs and fees on two loans

Carefully compare the numbers to traditional loan options. An 80 10 10 really shines if you value lower monthly payments and a larger loan amount.

Tips for Securing the Best 80 10 10 Loan

Follow these tips when applying for an 80 10 10 mortgage:

• Shop multiple lenders to compare interest rates and fees. Online lenders often offer competitive 80 10 10 loans.
• Prioritize improving your credit score and debt-to-income ratio. This can help qualify for better rates.
• Ask lenders if they sell their second mortgages or keep them in-house. In-house servicing can provide more flexibility.
• Seek a fixed interest rate on the second mortgage. This provides payment stability over time.
• Review second mortgage terms closely – are there any prepayment penalties or balloon payments?
• Reduce other debt obligations as much as possible to offset the larger mortgage payments.

Alternatives to 80 10 10 Loans

An 80 10 10 loan isn’t your only option. Here are a few other choices if this structure doesn’t fit your scenario:

• Traditional loan with PMI – Requires less downpayment but includes PMI costs until you reach 20% equity.
• FHA loan – Only 3.5% down, but mortgage insurance premiums for life of loan.
• VA loan – No downpayment for qualified veterans, also includes mortgage insurance.
• 80 15 5 loan – Uses slightly lower second mortgage (15% instead of 20%) and higher downpayment (5% more).
• 80 20 loan – Eliminates PMI with higher second mortgage (20% of value) and no downpayment.

Crunch the numbers in an 80 10 10 loan calculator to decide which structure provides the optimal monthly payment and overall cost for your situation.

The Bottom Line

While complex compared to traditional mortgages, an 80 10 10 loan allows qualified buyers to get into a home faster with less cash out of pocket. Run multiple calculations to see if the savings and benefits make sense for your home purchase. With diligent research and comparison shopping, an 80 10 10 can be a viable route to homeownership.