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Piggyback Loan
What Is a Piggyback Loan?
A piggyback loan involves taking out two mortgages simultaneously to finance a home purchase.
It is often structured as:
- 80% first mortgage
- 10% second mortgage
- 10% down payment
This structure is sometimes referred to as an 80-10-10 loan.
Why It Matters in a Mortgage
Piggyback loans can:
- Avoid private mortgage insurance (PMI)
- Reduce upfront cash requirements
- Increase total borrowing complexity
Because the second loan typically carries a higher interest rate, total cost must be carefully evaluated.
How It Works
- First mortgage covers majority of purchase price.
- Second mortgage covers additional portion.
- Borrower contributes down payment.
The second mortgage is subordinate to the first.
Piggyback Loan vs. Single Mortgage with PMI
Piggyback → Two loans, no PMI
Single Loan → One loan with PMI
Cost structure differs.
FAQs About Piggyback Loans
Are piggyback loans common today?
They are less common but still available.
Does the second loan have higher interest?
Typically yes, due to higher risk position.
Do they help avoid PMI?
Yes, when structured properly.
Related Terms
