80-10-10 Mortgage

If you put down less than 20% when you're buying a home, in most cases, you have to then buy PMI, or Private Mortgage Insurance, an extra fee that, in theory, makes up for the higher risk the bank is taking on in loaning money to you. Housing prices could easily drop 10% and you could lose your job and just walk away from the house, leaving the bank which, after transaction fees, is losing money on their loan. So the 80-10-10 rule tries to avoid these fees and this type of risk, such that a home buyer puts 10% in down payment...but then simultaneously takes out a SECOND mortgage, i.e. one that sits behind the first mortgage in a deadbeat "not gonna pay back what I promised" situation. That second mortgage is pegged at 10% of the total purchase price as well, so that as far as the primary lender is concerned, the home buyer has, in fact, put 20% down, and they can likely avoid the PMI fees which were notionally more expensive than the second mortgage costs.