Final answer:
The 80/10/10 in a split or piggyback loan refers to the loan structure where 80% is the primary mortgage, 10% is the secondary loan, and 10% is the down payment, which helps borrowers to avoid PMI.
Step-by-step explanation:
In a split–or piggyback–loan, the 80/10/10 ratio represents the percentages of the home’s value that are financed by the first mortgage, the second mortgage, and the down payment, respectively. The first number (80) refers to the first mortgage which is 80% of the property's value; the second number (10) is a secondary loan which is 10% of the property's value; and the third number (10) indicates the borrower's down payment, which is also 10% of the property's value.
This type of financing structure is often used to avoid paying private mortgage insurance (PMI) that is usually required when the down payment is less than 20%. Therefore, by structuring loans in an 80/10/10 format, borrowers can compound a smaller down payment with a second mortgage and still avoid the additional PMI expense.