What In The World Is An 80 15 5 Mortgage?

An 80 15 5 mortgage is an 80% first mortgage with a 15% second mortgage and a 5% down payment.

With a purchase price of $200,000 you would have the following:

Down Payment: $10,000

First Mortgage: $160,000

Second Mortgage: $30,000

The big benefit of constructing your loan this way is that if you are doing a conforming loan will avoid paying mortgage insurance. Mortgage insurance is required for loans with less than 20% down. But doing your loan this way you avoid having o pay the necessary evil of mortgage insurance.

Many times you will have two choices when it comes to the second mortgage portion of the 80 15 5 mortgage. The second mortgage can either be a fixed second mortgage or it can be a line of credit.

If it is a fixed second mortgage. The interest rate is fixed for the entire length of the mortgage. Most fixed second mortgages are a 30 due in 15. Meaning that the second mortgage is amortized over 30 years, but is due in 15 years. Basically it is a balloon payment. Don’t let this scare you. Statistically people refinance or sell their home every 7 to 9 years any ways.

If it is a line of credit as the second mortgage. The interest rate will fluctuate as the Federal Reserve adjusts the prime interest rate up or down. The benefit of going with the line of credit as the second mortgage on your 80 15 5 mortgage is that the interest rate is normally much lower than the fixed seconds rate. It can be 2% to 5% lower.

If you are considering doing the 80 15 5 loan have your loan officer compare the two different options if you have both available to you.

You may also want to consider an 80 15 5 interest only loan. The interest only loan could save you hundreds of dollars in mortgage payments every month.