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80/15/5 - No Mortgage Insurance

An 80-15-5 Program sometimes called a Piggy-Back loan, is a fixed rate loan program designed to help borrower's purchase a home with as little as 5% down while avoiding Mortgage Insurance. Not only does it save you money, it also maximizes your tax benefits. Example: Borrowers wish to purchase a home for $350,000 with a down payment of $17,500.

Problem: Most mortgage lenders will provide a first mortgage of $332,500 with a Mortgage Insurance payment (which is not tax deductible) of approximately $216 per month.

Solution: 80-15-5 or perhaps, an 80-10-10 programis two loans for the price of one. Under the 80-15-5 scenario, we would issue a first mortgage of $266,000 with a second mortgage of $49,875 and eliminate the additional cost of Mortgage Insurance. All borrowers have a real aversion to paying mortgage insurance. Justifiably so, as mortgage insurance is costly, involves a second Approval process, and is not tax deductible

Another great benefit is that after the second loan (Piggy-Back) is paid off, usually (5-15 years) you are left with only one payment. This can be real helpful if you are planning to retire or take on additional debt in the near future, i.e.., college expenses, second home.

5% Down Payment
$0.00 Mortgage Insurance
80/15/5 involves a purchase money second
(80% first lien, 15% second lien, 5% down)
Program Comparison
. . . .
95% LTV
80/15/5 CLTV
. . . .
Sales Price . $200,000 . $200,000
1st Mortgage . $190,000 . $160,000
2nd Mortgage . N/A . $30,000
Monthly Mortgage Insurance . $123.50 . -0-
P:I Payment 1st . $1361.18 . $1146.26
P:I Payment 2nd . N/A . $ 317.81
Monthly Payment . $1484.68 . $1464.07
Balance After 15 yrs. . $146,303 . $123,203
Payment After 15 yrs.
$1361.18 . $1146.26
*Taxes and insurance not included in payment calculations*

Benefits to Borrower
Enhanced tax benefits, interest on 2nd is 100% tax deductible, mortgage insurance is not. Be sure and check with your tax advisor.
  • Allows borrowers to manage their own escrows.
  • Greater equity build-up in your mortgage loan!
  • Saves on mortgage loan insurance costs!
  • No pre-payment penally on 1st or 2nd lien.
  • Allows for expanded ratios and loosens underwriting.

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