January 19, 2004

12:05 PM

Anyone tried 80-10-10 financing? Care to share any thoughts? My wife and I are looking at buying our first house and haven't been able to find many testimonials on google or fool.com.
posted by jragon to (6 comments total)

This is very similar to what we did to finance our house, and it works out just fine. Actually, it was really the only way we could afford to break into the market at all since we had very few assets with which to make a down payment, and our area has ridiculously inflated real estate values. Securing a single loan for the amount proved next to impossible.

Some things to note: the smaller loan often has a balloon payment after a certain number of years -- you'll want to refinance or consolidate it before that happens. In our case, the "little" loan is a fixed/adjustable, and will need to be turned over before the adjustable rate kicks in (since rate adjustments are nearly always in the lender's favor).

We don't have to deal with PMI, and I pay the taxes separately. I have to cut two checks every month, but it's not a very big deal; I just use my bank's bill payment system and have it cut the mortgage checks on payday.
posted by majick at 12:48 PM on January 19, 2004

My husband and I did an 80-10-10 to buy our house, and it worked out really well. You usually have to pay higher interest on the smaller loan, but the interest is tax deductible while PMI isn't.
posted by LittleMissCranky at 1:07 PM on January 19, 2004

We did 80-15-5 and it was fine. If you can afford to pay down the smaller loan more aggressively (since it will have a considerably higher interest rate) do it.
posted by me3dia at 1:27 PM on January 19, 2004

We did a 90-10 on our first house last month, and as majick says, sometimes it's the only way to get into the housing market for younger people without a lot of cash/collateral. Especially in urban areas.

On the second smaller one, we are putting an extra $85 month towards the principle which will (hopefully) let us have it paid off before it's term, dodging the balloon payment and a fair amount of interest. We've only made one payment so far, but we're pretty happy with the way it's worked out.
posted by djc at 2:49 PM on January 19, 2004

We did something similar, an 80 20 loan to buy our house. It was the only way we could afford it here in San Diego where the market is super heated.
Avoid pmi at all costs.

The best advice I can give is no matter what, even if its your brother writing the loan, shop the loan. Its easy to do. From the first lender you deal with get a copy of your credit report (they have to give it to you upon request, its the law) Talk to friends, find out who they used and you can get a quote over the phone in less than 15 minutes.

No one lender/mortgage broker has access to all loans no matter what they may tell you.

Get in any way you can. Rent is a trap.
posted by keithl at 10:22 AM on January 20, 2004

I did an 80-10-10 with ING Bank and everything went through fine. The rates on both were very reasonable and because it was direct through the bank there were no fees.*

* Ok there were some fees, but they were very reasonable and for real things, like the appraisal.
posted by dirtylittlemonkey at 1:27 PM on January 20, 2004