“Expert verified” means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced.
Bankrate is always editorially independent. While we adhere to strict , this post may contain references to products from our partners. Heres an explanation for . Our is to ensure everything we publish is objective, accurate and trustworthy. Bankrate logo
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our mortgage reporters and editors focus on the points consumers care about most — the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more — so you can feel confident when you make decisions as a homebuyer and a homeowner. Bankrate logo
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo
What is a Piggyback Option and Why Should You Care?
Ever found yourself drooling over your dream home but crying over the massive down payment? I’ve been there! The piggyback loan option might just be your financial superhero,
A piggyback loan (also called a combination mortgage or 80/10/10 loan) is essentially a strategy where you take out two mortgages simultaneously when buying a home. The first mortgage covers 80% of the home’s purchase price, while the second smaller loan “piggybacks” on top, typically covering 10% of the purchase price. You then contribute the remaining 10% as your down payment.
Think of it like this Instead of getting one big loan. you’re splitting your financing into two parts that work together – kinda like how peanut butter and jelly make a better sandwich than either one alone!
How Does a Piggyback Mortgage Actually Work?
Let’s break down how these mortgages function with a real-world example:
Say you’re buying a $400000 home. With a traditional mortgage requiring 20% down you’d need to cough up $80,000 in cash upfront. Ouch!
With the standard 80/10/10 piggyback structure:
- First mortgage: $320,000 (80% of purchase price)
- Second mortgage: $40,000 (10% of purchase price)
- Your down payment: $40,000 (10% of purchase price)
You’ve just cut your down payment requirement in half! That’s $40,000 you can keep in your pocket or use for renovations, furniture, or your emergency fund.
Some lenders even offer 80/15/5 arrangements, where the second mortgage covers 15% of the purchase price and you only need to put down 5%. For that same $400,000 home, your down payment would be just $20,000!
Types of Piggyback Loans: Know Your Options
Not all piggyback loans are created equal. Here are the main types you’ll encounter:
Home Equity Loan Piggyback
This is a lump-sum second mortgage with a fixed interest rate. You’ll know exactly what your payments will be for the life of the loan. The average rate for home equity loans was about 8.23% as of May 2025.
Home Equity Line of Credit (HELOC) Piggyback
This second mortgage works as a revolving credit line, similar to a credit card. It typically has a variable interest rate, so your payments may change over time. The average HELOC rate was approximately 8.20% as of May 2025.
Down Payment Mortgage
While not technically a piggyback loan, these specialized loans help cover your down payment. They’re often offered through state housing finance authorities and may have favorable terms or even be forgivable after a few years.
The Good, Bad, and Ugly of Piggyback Loans
The Good Stuff
No PMI Needed: The biggest advantage is avoiding private mortgage insurance (PMI), which typically costs between 0.46% to 1.5% of your loan amount annually. On a $320,000 loan, that’s $1,472 to $4,800 per year in savings!
Jumbo Loan Avoidance: If you’re buying an expensive home, a piggyback structure can help you stay under the conforming loan limit ($806,500 in most areas for 2025), allowing you to avoid stricter jumbo loan requirements.
Lower Down Payment: You can buy a home with just 10% down (or sometimes even 5%) without paying PMI.
The Not-So-Good Stuff
Variable Rates on Second Mortgage: The second loan typically has a higher interest rate that may be adjustable, meaning your payments could increase if rates rise.
Double Closing Costs: You’re getting two loans, which means potentially paying two sets of closing costs.
Refinancing Headaches: Having two mortgages from different lenders can make refinancing more complicated down the road.
Do You Qualify? Piggyback Mortgage Requirements
Lenders aren’t just handing these out like candy! You’ll need to meet these general requirements:
- Credit Score: Typically 700+ (though some lenders might go as low as 680)
- Debt-to-Income Ratio: Usually 36% or lower, including payments on both loans
- Income Verification: Stable income and employment history
- Down Payment: At least 5-10% of the purchase price in cash
Remember, these requirements can vary by lender, so it’s worth shopping around to find the best fit for your financial situation.
How to Snag a Piggyback Loan: Step-by-Step Guide
Ready to give this strategy a try? Here’s how to make it happen:
- Research Second Mortgage Lenders: Not all lenders offer piggyback loans, so do your homework.
- Apply for Your Primary Mortgage First: Then apply for the second mortgage shortly after.
- Respond Quickly to Questions: Keep the process moving by promptly providing any requested documentation.
- Close Both Loans Simultaneously: Both loans will close at the same time when you purchase your home.
Alternatives to Consider: Other Ways to Skin the Cat
Piggyback loans aren’t the only way to get into a home with less than 20% down. Consider these alternatives:
FHA Loans
These government-backed loans require as little as 3.5% down if your credit score is 580+. If your score is between 500-579, you’ll need 10% down. However, you’ll still pay mortgage insurance.
Conventional 97 Loans
Offered through Fannie Mae and Freddie Mac, these loans require just 3% down but will include PMI until you reach 20% equity.
VA Loans
If you’re a service member, veteran, or eligible spouse, you might qualify for a VA loan with 0% down and no PMI. It’s honestly one of the best deals out there if you qualify!
Piggyback Strategy for Current Homeowners: Leverage What You’ve Got
Already own a home and looking to buy another? You can use a variation of the piggyback strategy:
- Take out a home equity loan or HELOC on your current home
- Use those funds for the down payment on your new home
- After selling your current home, use the proceeds to pay off the home equity loan
This approach can help you avoid contingent offers and bridge the gap between buying and selling, but it requires having significant equity in your current home (usually at least 20%).
Real Talk: Is a Piggyback Loan Right for You?
A piggyback loan can be a smart move if:
- You have good credit but limited cash for a down payment
- You want to avoid PMI
- You’re buying an expensive home but want to avoid jumbo loan requirements
- You plan to stay in the home for at least a few years
But it might not be the best choice if:
- Your credit score is below 680
- You have a high debt-to-income ratio
- You’re concerned about potentially rising interest rates
- You might want to refinance or sell within a short timeframe
The History of Piggyback Loans: Then and Now
Piggyback loans were super popular during the early to mid-2000s housing boom. They became less common after the 2008 financial crisis but have been making a comeback as home prices rise and buyers look for creative financing solutions.
According to the Consumer Financial Protection Bureau (CFPB), piggyback structures were common during the mortgage boom in the early to mid-2000s. While they became rare for a while, they’re starting to return to the market.
FAQs: Everything Else You Wanted to Know
Q: Can I pay off the second mortgage early?
A: Usually yes, but check for prepayment penalties first.
Q: What happens if my home value declines?
A: This can complicate refinancing or selling, as both lenders would need to agree to any changes.
Q: Are interest rates on both loans tax-deductible?
A: Potentially, but consult with a tax professional, as tax laws change frequently.
Q: Can I use a piggyback loan for an investment property?
A: It’s possible but more difficult, as lenders typically have stricter requirements for non-primary residences.
Q: Will taking two mortgages hurt my credit score?
A: Initially, you might see a small dip from the two credit inquiries, but making on-time payments on both loans can positively impact your score over time.
The Bottom Line: Is a Piggyback Worth It?
When shopping for a mortgage, always compare the total cost of different loan structures. Request quotes for both a piggyback arrangement and a single mortgage with PMI to see which makes more financial sense for your situation.
Remember, the “best” mortgage is the one that fits your specific financial situation and homeownership goals, not necessarily the one with the lowest monthly payment or down payment requirement.
Types of piggyback mortgages
There are various types of piggyback loans, some of which you’re likely to have heard of before:
- Home equity loan: Home equity loans are a lump sum loan that typically allows existing homeowners to tap into the equity they’ve built up in their home. Equity is the amount of your home that you own outright, free and clear of any mortgage loan balance. In the case of a piggyback mortgage, the home equity loan is made at the same time as the mortgage you’re taking to purchase a home. The home equity loan becomes a second mortgage — piggybacking onto the first one — and the funds are used to cover a portion of the home purchase.
- Home equity line of credit: A home equity line of credit functions similarly to a home equity loan when used as a piggyback or second mortgage. You’d open the HELOC at the same time as the mortgage to purchase a home. Then, you’d use the funds from the HELOC to cover a portion of the home purchase.
- Down payment mortgage: Down payment mortgages function somewhat similarly to piggyback mortgages. It’s a loan that’s earmarked toward all or part of your down payment. It’s geared toward homebuyers who can’t put down 20 percent in cash toward the home purchase. Typically, this sort of loan comes from a formal down payment assistance program offered through a state housing finance authority. If it does, it often has reasonable interest rates, and may even be forgivable after a few years.
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Calendar Icon 6 years of experience Laurie Richards is a former mortgage editor on Bankrate’s Home Lending team.
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Thomas is a well-rounded financial professional, with over 20 years of experience in investments, corporate finance, and accounting. His investment experience includes oversight of a $4 billion portfolio for an insurance group. Varied finance and accounting work includes the preparation of financial statements and budgets, the development of multiyear financial forecasts, credit analyses, and the evaluation of capital budgeting proposals. In a consulting capacity, he has assisted individuals and businesses of all sizes with accounting, financial planning and investing matters; lent his financial expertise to a few well-known websites; and tutored students via a few virtual forums.
At Bankrate, we take the accuracy of our content seriously.
“Expert verified” means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced.
Their reviews hold us accountable for publishing high-quality and trustworthy content.
Bankrate is always editorially independent. While we adhere to strict , this post may contain references to products from our partners. Heres an explanation for . Our is to ensure everything we publish is objective, accurate and trustworthy. Bankrate logo
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our mortgage reporters and editors focus on the points consumers care about most — the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more — so you can feel confident when you make decisions as a homebuyer and a homeowner. Bankrate logo
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo