What is Piggyback Loan?
A piggyback loan is a second mortgage taken out simultaneously with a first mortgage to cover part of the down payment, often to avoid mortgage insurance.
A piggyback loan is a second mortgage that is closed at the same time as the first mortgage, typically to reduce the down payment requirement or avoid private mortgage insurance. A common structure is the eighty-ten-ten, where the first mortgage covers eighty percent, the piggyback loan covers ten percent, and you pay ten percent down. Borrowers use piggyback loans to buy a home with less cash upfront or to avoid PMI. Watch for higher interest rates on the second mortgage and potential closing costs. Also, having two loans means two payments, which can affect your debt-to-income ratio. Piggyback loans may be harder to qualify for than single mortgages.
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