The Combo Loan

There are three primary types of combo loans, each with a different purpose.


The 80-10-10 home loan is a combination of two mortgages, and is designed to eliminate the need for private mortgage insurance (PMI).  The 80 percent comes from your first mortgage, the second loan accounts for 10 percent, and the final 10 percent is the purchaser’s / borrower’s down payment.  The second loan can be a fixed rate second mortgage or a line of credit in the form of a home equity line of credit (HELOC).


Similar in concept to the 80-10-10 home loan, the 80-15-5 only requires a 5 percent down payment instead of a 10 percent down payment.  Though the interest rate and margin may be higher on the second mortgage with the 80-15-5 because of an increase in lending risk, you most likely will still pay less overall when compared with paying PMI.


Similar in concept to the 80-10-10, the 80-20 home loan requires no money as a down payment.  The combination of the first mortgage at 80 percent and the second mortgage at 20 percent, equals 100 percent financing of the home.

The first mortgage of any of these types of combo loans can be fixed or adjustable rate.  The second mortgage can also be a fixed rate or adjustable rate.  To get a combo loan you will need an excellent FICO score, closing costs, and six months of housing payments in reserve.

There is a premium of up to 1.5 percent charged on the first mortgage, and the interest rate on the second mortgage can be upward of 10 percent.

You’ll need to compare interest rates for the first and second mortgages to see if it is better to go this route or the route with just one mortgage along with PMI.

Combo Loan Example – pg 92