2nd mortgage is $89,800
interest is 10.6% 15 year balloon
2 year prepayment penalty

monthly payments $828

$828 x 180 months = $149,040

$149,040 + $89,800(15 balloon) = 233,840

$238,840 / $89,800 = 265% interest

where does this 10.6% come from?

10.6% is the annual percentage rate (APR).
For your first payment:
Principal * yearly rate / 12 months in a year
$89,800 * .106 / 12 = $793
The extra $35 goes towards paying down your principal.

what about the 265%?

and how did you calculate $35?

Alvin, when you do an 80/20 or 100% financing with a piggyback second, the rate on the second is always higher than the first.

Your second is a 30/15. Your payment is amortized over 30 years but due in 15 years (see my other post)
A second can be interest-only but usually it is a payment comprised of Principal + Interest.

What's the note rate on the 1st? (The payments are drawn from the note rate not the APR.)

What's the note rate on the 2nd?

Is the term on the second interest-only? What about your first?

Give us the total loan amount and we will break it down for you.

check my other post.

2nd @ 10.6% / $89,800 = $828.16.

The $35 mac is referring to is NOT a fixed payment each month, in fact it increases each month as the loan is amortized to eventually pay down your principal. When this comes due (for lump sum payment) in 15 years you will have a lump sum payment of $74,499.60. By then should you have the loan that long, your monthly payment applied toward your principal would be $168.59.