A piggyback mortgage refers to a second mortgage taken out on a property at the same time as a primary mortgage or refinancing. Generally, the primary mortgage makes up 80 percent of the loan, with the piggyback mortgage making up 10 percent.
Forget about PMI
The buyer puts down 10 percent cash on the property, but the piggyback mortgage allows them to forego having to pay private mortgage insurance. You need to put down at least 20 percent to avoid PMI, but the lender considers the piggyback loan as part of the down payment. These loans are also known as 80-10-10 loans.
Piggyback or Jumbo?
You might receive the piggyback loan from the same lender as the first mortgage or a different lender. Buyers wanting to avoid taking out a jumbo mortgage or those over the conforming loan limit – may also use a piggyback mortgage. In these situations, it’s always a rates question as to whether taking out the jumbo loan or using a piggyback mortgage saves money.