Loans
Piggyback Loan
A strategy where you take out two loans simultaneously to avoid paying private mortgage insurance. The most common structure is an 80/10/10: an 80% first mortgage, a 10% second mortgage (home equity loan), and a 10% down payment. This keeps the first mortgage at 80% LTV, eliminating the PMI requirement. While you avoid PMI, the second loan typically carries a higher interest rate, so run the numbers to see which approach costs less overall.
Why It Matters
Understanding Piggyback Loan is a key part of choosing the right mortgage. The type of loan you select affects your monthly payment, how much interest you pay over the life of the loan, and how much flexibility you have if your financial situation changes.
When comparing loan options, pay attention to how piggyback loan fits into the bigger picture of your borrowing costs. A knowledgeable loan officer or mortgage broker can help you evaluate whether this option aligns with your financial goals and timeline.