Two loans taken out simultaneously — a primary mortgage and a second mortgage — often to avoid private mortgage insurance or jumbo loan rates.
Full Definition
A piggyback loan involves taking out a second mortgage at the same time as your primary mortgage. The most common structure is 80/10/10: an 80% first mortgage, a 10% second mortgage, and a 10% down payment from the buyer. This structure keeps the first mortgage below the conforming loan limit and eliminates the need for PMI, which is required when a down payment is less than 20%. Another common structure is 80/15/5. The second mortgage usually comes with a higher rate than the first. Piggyback loans require more complex underwriting because two lenders are involved.
Related Terms
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