- \n
- What is a piggyback loan?<\/a><\/li>\n
- How a piggyback loan works<\/a><\/li>\n
- Is a piggyback loan right for you?<\/a><\/li>\n
- Pros and cons of a piggyback loan<\/a><\/li>\n
- Low-down-payment alternatives to piggyback loans<\/a><\/li>\n<\/ul>\n
<\/a><\/p>\n
What is a piggyback loan?<\/h2>\n
With a piggyback loan \u2014 also referred to as an 80\/10\/10 loan \u2014 you\u2019re essentially getting a smaller second mortgage<\/a> to cover a portion of your down payment. This smaller mortgage \u201cpiggybacks\u201d off the initial mortgage to get you to the amount that you wish to borrow.<\/p>\n
This second mortgage is likely to be a home equity line of credit (HELOC)<\/a> with a draw period of 10 years \u2014 but terms will vary from lender to lender.<\/p>\n
Tip: <\/b>In some cases, a piggyback loan can also help you purchase a home with a higher value and allow you to avoid getting a jumbo loan<\/a>.<\/div><\/div>\nFind Out: <\/i><\/b>How Much Down Payment Do You Need to Buy a House<\/i><\/b><\/a>
\n<\/a><\/p>\nHow a piggyback loan works<\/h2>\n
Piggyback loans are essentially two mortgages plus a down payment.<\/p>\n
The first number in the loan represents your initial mortgage, while the second number represents your second \u201cpiggyback\u201d mortgage. The third number is your down payment.<\/p>\n
How 80\/10\/10 loans work<\/h3>\n
While the 80\/10\/10 structure is the most common way of structuring a piggyback loan, there are alternatives, and those percentages aren\u2019t always the same.<\/p>\n
With the 80\/10\/10 piggyback loan, here\u2019s roughly what you can expect:
\n![\"80-10-10](\"https:\/\/www.credible.com\/blog\/wp-content\/uploads\/2021\/01\/What-is-an-80-10-10-Loan-Infographic.png\")
<\/p>\nHow 75\/15\/10 loans work<\/h3>\n
Another configuration of the piggyback loan is the 75\/15\/10 loan. A 75\/15\/10 loan is often used in condo purchases<\/a> as it can qualify you for a lower mortgage rate.<\/p>\n
In general, condo mortgages with a loan-to-value (LTV) ratio of more than 75% come with higher rates, which can cost more in the long run.<\/p>\n
Check Out: <\/i><\/b>Credit Score Needed to Get a Home Loan<\/i><\/b><\/a>
\n<\/a><\/p>\nIs a piggyback loan right for you?<\/h2>\n
A piggyback typically works best for borrowers who:<\/p>\n
- \n
- Want a smaller down payment<\/li>\n
- Don\u2019t wish to pay PMI<\/li>\n
- Are buying a condo and looking for a lower interest rate<\/li>\n
- Hope to avoid a jumbo loan<\/li>\n<\/ul>\n
Before getting a piggyback loan, it\u2019s important to crunch the numbers. Make sure the cost of the piggyback loan doesn\u2019t exceed the cost of PMI.<\/p>\n
Remember, you can eventually get rid of PMI, so that should figure into your calculations.<\/p>\n
While Credible doesn\u2019t offer piggyback loans, it can help you compare great home loan<\/a> rates and give you a better idea of how much you can afford. In just a few minutes, you can see personalized, prequalified rates from all of our partner lenders. Checking prequalified rates is simple and safe \u2014 and it won\u2019t affect your credit score.<\/p>\n
Credible makes getting a mortgage easy<\/strong><\/span><\/p>\n- \n
- Instant streamlined pre-approval:<\/strong> It only takes 3 minutes to see if you qualify for an instant streamlined pre-approval letter, without affecting your credit.<\/li>\n
- We keep your data private:<\/strong> Compare rates from multiple lenders without your data being sold or getting spammed.<\/li>\n
- A modern approach to mortgages:<\/strong> Complete your mortgage online with bank integrations and automatic updates. Talk to a loan officer only if you want to.<\/li>\n<\/ul>\n
Find Rates Now<\/a><\/p>\n
<\/p>\n
Trustpilot<\/a><\/div>\n<\/p>\n<\/div><\/div>\n<\/a><\/p>\n
Pros and cons of a piggyback loan<\/h2>\n
The main advantage of a piggyback loan is that it allows you to avoid PMI<\/a>. While this might seem like a good enough reason to get one, there are also a number of drawbacks to be aware of.
\n![\"pros-cons-piggyback-loans-inforgraphic\"](\"https:\/\/www.credible.com\/blog\/wp-content\/uploads\/2021\/01\/pros-cons-piggyback-loans-inforgraphic.png\")
<\/p>\nPros<\/h3>\n
- \n
- You can put less money down without paying PMI. <\/b>In general, when you put less than 20% down on a home, you have to pay mortgage insurance. With the help of a piggyback loan, you can bring less of your own money to the table, but still avoid paying PMI.<\/li>\n
- You can get a condo at a lower rate. <\/b>Many lenders charge higher interest rates on condo purchases that have a LTV of 75% or above. If you get a piggyback loan, you might see a lower interest rate by keeping the LTV below 75%. This could potentially save you thousands of dollars in interest over the life of the loan.<\/li>\n
- You can avoid getting a jumbo loan. <\/b>If you want to buy a higher-value home, you might need a jumbo loan. However, if you don\u2019t want to deal with the requirements that come with qualifying for a jumbo loan, a piggyback loan can help. Since it brings down the amount you have to borrow, it might bring you below the jumbo loan threshold.<\/li>\n<\/ul>\n
Cons<\/h3>\n
- \n
- They\u2019re harder to qualify for.<\/b> In many cases, you might have a harder time qualifying for a piggyback loan. Depending on the lender, you\u2019re likely to need a credit score of at least 680, as well as have a lower debt-to-income ratio<\/a>. This is because you\u2019re qualifying for a HELOC<\/a> on top of the original home loan \u2014 and doing it all at once.<\/li>\n
- They\u2019re more complicated to refinance. <\/b>You generally need to get permission from your HELOC lender to refinance a first mortgage<\/a>. As a result, you might need to pay off your piggyback loan before refinancing, or try to work out a situation in which you can refinance both at the same time.<\/li>\n
- You\u2019ll have to pay closing costs on two loans.<\/b> Remember that a piggyback loan is a separate loan from your primary mortgage. As a result, when you close on your transaction, you need to pay closing costs<\/a> for both loans. This can increase the cost of your home purchase.<\/li>\n<\/ul>\n
While Credible doesn\u2019t offer piggyback loans, you can easily compare mortgage rates from our partner lenders without leaving our platform. Simply enter some basic financial information in the table below, and you\u2019ll see several prequalified rates. Then, choose the best one for your budget.<\/p>\n
<\/div>\n - They\u2019re more complicated to refinance. <\/b>You generally need to get permission from your HELOC lender to refinance a first mortgage<\/a>. As a result, you might need to pay off your piggyback loan before refinancing, or try to work out a situation in which you can refinance both at the same time.<\/li>\n
- You can get a condo at a lower rate. <\/b>Many lenders charge higher interest rates on condo purchases that have a LTV of 75% or above. If you get a piggyback loan, you might see a lower interest rate by keeping the LTV below 75%. This could potentially save you thousands of dollars in interest over the life of the loan.<\/li>\n
- We keep your data private:<\/strong> Compare rates from multiple lenders without your data being sold or getting spammed.<\/li>\n
- Instant streamlined pre-approval:<\/strong> It only takes 3 minutes to see if you qualify for an instant streamlined pre-approval letter, without affecting your credit.<\/li>\n
- How a piggyback loan works<\/a><\/li>\n