Piggyback Loan

A piggyback loan is a second mortgage taken out at the same time as your main home loan, letting you split the purchase price across two loans so you can put less cash down and still skip private mortgage insurance.

Author: Casey Foster

Published on: 3/25/2026|8 min read

Fact Checked

Author: Casey Foster|Published on: 3/25/2026|8 min read

Fact Checked

Key Takeaways

A piggyback loan is a second mortgage that goes along with a primary mortgage to help you pay for part of your down payment.
The most common structure is 80/10/10, which means that the first loan pays for 80% of the home price, the second loan pays for 10%, and you put down 10%.
Most people who buy a home use this setup to avoid paying for private mortgage insurance, which can add hundreds of dollars to their monthly bill.
Most of the time, the second loan is a home equity line of credit with a variable rate, which means that your payment can change over time.
A piggyback loan can also help you keep your first mortgage below the conforming loan limit and out of the jumbo loan range.
You need good credit and a debt-to-income ratio that works for both lenders if you want to get two loans at once.

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What Is a Piggyback Loan?

A piggyback loan, sometimes called a combination loan or an 80/10/10 mortgage, is a home financing strategy that uses two separate loans to buy one property. The bigger loan, your primary mortgage, covers the bulk of the purchase price. The smaller loan rides along on top of it and picks up part of your down payment. That second loan is how this arrangement gets its name: it "piggybacks" on the first.

Why would anyone want two mortgages instead of one? The short answer is money. When you put less than 20% down on a conventional loan, your lender will require private mortgage insurance, or PMI. According to the Consumer Financial Protection Bureau, that second mortgage can be used to bump your effective down payment to 20%, which means PMI drops out of the picture entirely. For a lot of home buyers, that savings alone makes the second loan worth it.

This type of financing first became widely popular before the housing crisis, when lenders even offered 80/20 arrangements with zero cash down. That version has mostly disappeared. Today's piggyback loans cap the combined financing at about 90% of the home's value, so you'll still need to bring 10% to the closing table. That 10% skin in the game makes the structure much safer for both you and the lender.

Piggyback loans can work for a range of buyers, from someone buying their first condo to someone shopping in a pricey market where loan amounts climb fast. The key thing to understand is that you're managing two separate debts, each with its own rate, payment, and terms.

How a Piggyback Loan Works

The numbers in "80/10/10" tell the whole story. The first number is the percentage of the home's price covered by your primary mortgage. The second number is how much the piggyback loan covers. And the last number is your cash down payment. So on a $400,000 house, an 80/10/10 split looks like this: a $320,000 first mortgage, a $40,000 second mortgage, and $40,000 out of your pocket.

Your first mortgage works like any other conventional loan. Most buyers choose a 30-year fixed rate, and you qualify based on your credit score, income, and debt-to-income ratio. Nothing unusual there.

The second loan is where things get a little different.

The Second Mortgage

That smaller piggyback loan is usually a home equity line of credit, also called a HELOC. A HELOC works more like a credit card than a traditional loan. You get a credit line secured by the equity in your new home, and you can draw on it as needed during the first several years. Most HELOCs have variable interest rates tied to the prime rate, which means your monthly payment on that piece can go up or down depending on what the market does.

Some lenders offer a fixed-rate home equity loan as the second mortgage instead. This gives you a set monthly payment that won't change, but the interest rate is often a bit higher than what you'd get on a HELOC. Which one makes more sense depends on how long you plan to carry that second loan and how comfortable you are with rate swings.

Closing on Two Loans at Once

Both loans close at the same time, on the same day. You'll sign two sets of paperwork at the closing table and end up with two separate monthly payments going to two different loan servicers. Some lenders handle both loans in-house, which can simplify the process. Others partner with a second-lien lender behind the scenes. Either way, your job is to make sure you're comfortable managing both bills every month.

Types of Piggyback Loans

The 80/10/10 is the arrangement most people think of, but it's not the only option.

80/15/5 Piggyback Loan

This version bumps the second mortgage up to 15% of the home price and drops your cash down payment to just 5%. You'll borrow more on that second loan, which usually means a higher overall interest cost. But if you don't have a full 10% saved, this can get you into a home sooner while still dodging PMI.

75/15/10 Piggyback Loan

Here the first mortgage drops to 75% and the second loan picks up 15%. Buyers who go this route are typically trying to keep the primary loan under a specific threshold. Condos, for example, sometimes call for a 25% down payment to get the best rate, and this structure can help hit that mark. According to Fannie Mae, staying under certain loan-to-value cutoffs can unlock better pricing on your primary mortgage, so this math can really work in your favor.

Piggyback Loan vs. PMI: Running the Numbers

This is the comparison that matters most to your wallet. Let's walk through a real example so you can see how the costs stack up.

Say you're buying a home for $400,000 and you have $40,000 saved for a down payment. That's 10% down. Without a piggyback loan, you'd get a single conventional mortgage for $360,000 and pay PMI until you hit 20% equity. According to Freddie Mac, PMI typically runs $30 to $70 per month for every $100,000 you borrow. On a $360,000 loan, that could mean roughly $108 to $252 per month in insurance premiums alone.

Now let's run the piggyback version. You take out a primary mortgage for $320,000 at 80% loan-to-value and a $40,000 HELOC as the second mortgage. Your first mortgage at 6.5% gives you a principal and interest payment of about $2,023 per month. The HELOC at 8% on $40,000 adds about $267 per month in interest. So your total house payment on the piggyback comes to around $2,290 before taxes and insurance.

With the single-loan route at 6.5% on $360,000, your principal and interest is about $2,275. Add PMI at even the low end of Freddie Mac's range and you're looking at roughly $2,383. The piggyback saves you around $93 a month in this example, plus you have no PMI hanging over you. AmeriSave can walk you through both scenarios using your actual numbers to see which path costs less over the life of the loan.

One thing to keep in mind: PMI goes away once you reach 20% equity, either through paying down your balance or because your home's value goes up. The second mortgage sticks around until you pay it off. So the real question is how quickly you can knock out that HELOC. If you can pay it off in three to five years, the piggyback usually wins. If you're going to carry it for the full term, PMI might cost less over time.

Who Should Think About a Piggyback Loan?

Not everyone needs two loans to buy a home. But a piggyback can make a lot of sense in specific situations. You might benefit if you have 10% to put down but want to avoid PMI, if you're buying in a high-cost area and your loan amount would push past the conforming limit set by the Federal Housing Finance Agency, or if you're buying a new home before selling your current one and need a temporary bridge for the down payment.

People buying condos sometimes land on piggyback loans, too. Some condo projects require a 25% down payment at the primary loan level to get the best terms, and a 75/15/10 structure can make that work without draining your savings.

On the flip side, if you qualify for an FHA loan with 3.5% down, or if your credit score makes it hard to get approved for two separate loans, a piggyback probably isn't the best fit.

Risks and Drawbacks of Piggyback Loans

Two loans means two sets of everything. Two monthly payments, two interest rates, and two sets of closing costs. That complexity is the biggest drawback of this strategy. If you're the type of person who likes a simple, single payment each month, managing two debts can feel like a hassle.

The interest rate on your second mortgage will almost certainly be higher than the rate on your first. HELOCs often carry variable rates, so if interest rates climb, your monthly HELOC payment goes up with them. My colleague on the operations side puts it this way: a variable rate is fine when you have a plan to pay it off, but it can sneak up on you if you just make minimum payments and forget about it.

Refinancing can also get tricky. If you want to refinance your primary mortgage down the road, the second-lien holder has to agree to stay in second position. That subordination process can slow things down or even block the refi if the second lender doesn't cooperate. Some borrowers end up paying off the HELOC entirely before they can refinance, which takes extra cash.

And if home values drop, you could owe more than the house is worth across both loans. During the housing crisis, this was a major issue for home buyers who had taken out 80/20 piggyback arrangements with no money down. The 10% down payment required today gives you more of a cushion, but the risk doesn't disappear completely.

How to Qualify for a Piggyback Loan

Getting approved for a piggyback loan means qualifying for two separate products at the same time. Your primary mortgage follows standard conventional guidelines: most lenders want a credit score of at least 620 and a debt-to-income ratio under 50%.

The second mortgage has tighter rules. Many HELOC lenders look for a credit score of 680 or higher, and they may cap your DTI at 43%. You'll need to show steady income, enough cash for the down payment, and reserves to handle both monthly payments. AmeriSave's loan team can review your full financial picture and tell you where you stand on both fronts before you start house hunting.

Keep in mind that you'll also pay closing costs on each loan. The fees on the second mortgage are usually smaller because the loan amount is smaller, but they still add up. Ask your lender for a detailed breakdown so you can factor those costs into your budget.

The Bottom Line

A piggyback loan can be a smart way to keep more cash in your pocket while avoiding PMI. The math works especially well if you have 10% down, good credit, and a plan to pay off the second loan within a few years. But two loans come with two sets of costs and two sets of rules, so you need to look at the full picture before you commit. Compare the total monthly payment of a piggyback against a single loan with PMI. Run the numbers over your expected time in the home. AmeriSave can help you do exactly that, so you know which option actually saves you money.

Frequently Asked Questions

Most people who buy homes choose the 80/10/10 structure. The buyer pays 10% of the purchase price in cash, while the first mortgage covers 80% and the second mortgage covers 10%. This combination brings the first mortgage to exactly 80% loan-to-value, which is the point at which private mortgage insurance stops. For buyers with different amounts of cash on hand or different financing goals, 80/15/5 and 75/15/10 are other options that can work. AmeriSave has regular mortgage options that work well with second-mortgage programs, so you can find the split that works for your budget.

Yes. If the home you want to buy needs a primary mortgage that is higher than the FHFA's conforming loan limit, you can keep your first mortgage under that limit by using a piggyback loan. Most counties in the U.S. have a conforming limit of $832,750 for a single-unit property. If you use a second mortgage to help pay for part of the purchase, you can keep the main loan within conforming limits and maybe get a better rate. To find out how conforming and jumbo rates compare in your area, go to AmeriSave's mortgage rates page.

You might be able to deduct the interest on a second mortgage used to buy, build, or make major improvements to your home, as long as the total loan amount stays within IRS limits. The IRS says that if you file jointly, you can deduct the interest on up to $750,000 in total mortgage debt. That limit includes both your first and second loans. Tax rules are different for everyone, so you should talk to a tax expert about your own situation.

You will need to meet the credit requirements for both loans. Most of the time, you need a score of at least 620 to get a primary conventional mortgage. However, the second mortgage usually has a higher bar. On the HELOC or home equity loan part, many lenders want to see a score of 680 or higher. The second lender may have a lower cap than the first, and your debt-to-income ratio is also important. Before you start applying, AmeriSave's prequalification tool can give you a quick idea of where you stand.

You can, but it takes a few more steps. The second-lien holder must agree to stay in a subordinate position if you only want to refinance the primary mortgage. That process, which is called subordination, can take more time and paperwork. Some people who borrow money choose to pay off their second mortgage before refinancing so they only have to deal with one lien. You might be able to combine both loans into one new mortgage if you have enough equity. Check out AmeriSave's refinancing options to see what makes the most sense based on your current balances and interest rates.

It usually takes the same amount of time to close as a regular mortgage, which is 30 to 45 days. The process runs in parallel instead of back to back because both loans go through underwriting at the same time. If the two lenders are from different companies and their schedules don't match up perfectly, the timeline may take a little longer. Working with a lender like AmeriSave that does both parts of the deal can help things stay on track.

Not all second mortgages are piggyback loans, but a piggyback loan is a type of second mortgage. When you open a second mortgage at the same time as the first to help pay for a home, that's called "piggyback." On the other hand, a standalone second mortgage is something you get after you've already bought the house. You usually use it to get money from your equity for repairs, debt consolidation, or other costs. Both use your home as collateral, but they do so at different times and for different reasons. If you're interested in either option, you can find out more about AmeriSave's home equity options.

The money from the sale pays off both loans. You get the money after the first mortgage is paid off, then the second mortgage, and then the rest goes to you. As long as your home sells for more than the total amount you owe on both loans, the process is easy. If your home is worth less than you owe, things get more complicated because both lenders need to agree to a short sale. That's not very common for home buyers who put down 10%, but it's good to know. AmeriSave's ComeHome app lets you keep track of property values in your area.

Key Takeaways
What Is a Piggyback Loan?
How a Piggyback Loan Works
Types of Piggyback Loans
Piggyback Loan vs. PMI: Running the Numbers
Who Should Think About a Piggyback Loan?
Risks and Drawbacks of Piggyback Loans
How to Qualify for a Piggyback Loan
The Bottom Line
FAQs

What Is a Piggyback Loan? A piggyback loan, sometimes called a combination loan or an 80/10/10 mortgage, is a home financing strategy that uses two separate loans to buy one property. The bigger loan, your primary mortgage, covers the bulk of the purchase price. The smaller loan rides along on top of it and picks up part of your down payment. That second loan is how this arrangement gets its name: it "piggybacks" on the first. Why would anyone want two mortgages instead of one? The short answer is money. When you put less than 20% down on a conventional loan, your lender will require private mortgage insurance, or PMI. According to the Consumer Financial Protection Bureau, that second mortgage can be used to bump your effective down payment to 20%, which means PMI drops out of the picture entirely. For a lot of home buyers, that savings alone makes the second loan worth it. This type of financing first became widely popular before the housing crisis, when lenders even offered 80/20 arrangements with zero cash down. That version has mostly disappeared. Today's piggyback loans cap the combined financing at about 90% of the home's value, so you'll still need to bring 10% to the closing table. That 10% skin in the game makes the structure much safer for both you and the lender. Piggyback loans can work for a range of buyers, from someone buying their first condo to someone shopping in a pricey market where loan amounts climb fast. The key thing to understand is that you're managing two separate debts, each with its own rate, payment, and terms. How a Piggyback Loan Works The numbers in "80/10/10" tell the whole story. The first number is the percentage of the home's price covered by your primary mortgage. The second number is how much the piggyback loan covers. And the last number is your cash down payment. So on a $400,000 house, an 80/10/10 split looks like this: a $320,000 first mortgage, a $40,000 second mortgage, and $40,000 out of your pocket. Your first mortgage works like any other conventional loan. Most buyers choose a 30-year fixed rate, and you qualify based on your credit score, income, and debt-to-income ratio. Nothing unusual there. The second loan is where things get a little different. The Second Mortgage That smaller piggyback loan is usually a home equity line of credit, also called a HELOC. A HELOC works more like a credit card than a traditional loan. You get a credit line secured by the equity in your new home, and you can draw on it as needed during the first several years. Most HELOCs have variable interest rates tied to the prime rate, which means your monthly payment on that piece can go up or down depending on what the market does. Some lenders offer a fixed-rate home equity loan as the second mortgage instead. This gives you a set monthly payment that won't change, but the interest rate is often a bit higher than what you'd get on a HELOC. Which one makes more sense depends on how long you plan to carry that second loan and how comfortable you are with rate swings. Closing on Two Loans at Once Both loans close at the same time, on the same day. You'll sign two sets of paperwork at the closing table and end up with two separate monthly payments going to two different loan servicers. Some lenders handle both loans in-house, which can simplify the process. Others partner with a second-lien lender behind the scenes. Either way, your job is to make sure you're comfortable managing both bills every month. Types of Piggyback Loans The 80/10/10 is the arrangement most people think of, but it's not the only option. 80/15/5 Piggyback Loan This version bumps the second mortgage up to 15% of the home price and drops your cash down payment to just 5%. You'll borrow more on that second loan, which usually means a higher overall interest cost. But if you don't have a full 10% saved, this can get you into a home sooner while still dodging PMI. 75/15/10 Piggyback Loan Here the first mortgage drops to 75% and the second loan picks up 15%. Buyers who go this route are typically trying to keep the primary loan under a specific threshold. Condos, for example, sometimes call for a 25% down payment to get the best rate, and this structure can help hit that mark. According to Fannie Mae, staying under certain loan-to-value cutoffs can unlock better pricing on your primary mortgage, so this math can really work in your favor. Piggyback Loan vs. PMI: Running the Numbers This is the comparison that matters most to your wallet. Let's walk through a real example so you can see how the costs stack up. Say you're buying a home for $400,000 and you have $40,000 saved for a down payment. That's 10% down. Without a piggyback loan, you'd get a single conventional mortgage for $360,000 and pay PMI until you hit 20% equity. According to Freddie Mac, PMI typically runs $30 to $70 per month for every $100,000 you borrow. On a $360,000 loan, that could mean roughly $108 to $252 per month in insurance premiums alone. Now let's run the piggyback version. You take out a primary mortgage for $320,000 at 80% loan-to-value and a $40,000 HELOC as the second mortgage. Your first mortgage at 6.5% gives you a principal and interest payment of about $2,023 per month. The HELOC at 8% on $40,000 adds about $267 per month in interest. So your total house payment on the piggyback comes to around $2,290 before taxes and insurance. With the single-loan route at 6.5% on $360,000, your principal and interest is about $2,275. Add PMI at even the low end of Freddie Mac's range and you're looking at roughly $2,383. The piggyback saves you around $93 a month in this example, plus you have no PMI hanging over you. AmeriSave can walk you through both scenarios using your actual numbers to see which path costs less over the life of the loan. One thing to keep in mind: PMI goes away once you reach 20% equity, either through paying down your balance or because your home's value goes up. The second mortgage sticks around until you pay it off. So the real question is how quickly you can knock out that HELOC. If you can pay it off in three to five years, the piggyback usually wins. If you're going to carry it for the full term, PMI might cost less over time. Who Should Think About a Piggyback Loan? Not everyone needs two loans to buy a home. But a piggyback can make a lot of sense in specific situations. You might benefit if you have 10% to put down but want to avoid PMI, if you're buying in a high-cost area and your loan amount would push past the conforming limit set by the Federal Housing Finance Agency, or if you're buying a new home before selling your current one and need a temporary bridge for the down payment. People buying condos sometimes land on piggyback loans, too. Some condo projects require a 25% down payment at the primary loan level to get the best terms, and a 75/15/10 structure can make that work without draining your savings. On the flip side, if you qualify for an FHA loan with 3.5% down, or if your credit score makes it hard to get approved for two separate loans, a piggyback probably isn't the best fit. Risks and Drawbacks of Piggyback Loans Two loans means two sets of everything. Two monthly payments, two interest rates, and two sets of closing costs. That complexity is the biggest drawback of this strategy. If you're the type of person who likes a simple, single payment each month, managing two debts can feel like a hassle. The interest rate on your second mortgage will almost certainly be higher than the rate on your first. HELOCs often carry variable rates, so if interest rates climb, your monthly HELOC payment goes up with them. My colleague on the operations side puts it this way: a variable rate is fine when you have a plan to pay it off, but it can sneak up on you if you just make minimum payments and forget about it. Refinancing can also get tricky. If you want to refinance your primary mortgage down the road, the second-lien holder has to agree to stay in second position. That subordination process can slow things down or even block the refi if the second lender doesn't cooperate. Some borrowers end up paying off the HELOC entirely before they can refinance, which takes extra cash. And if home values drop, you could owe more than the house is worth across both loans. During the housing crisis, this was a major issue for home buyers who had taken out 80/20 piggyback arrangements with no money down. The 10% down payment required today gives you more of a cushion, but the risk doesn't disappear completely. How to Qualify for a Piggyback Loan Getting approved for a piggyback loan means qualifying for two separate products at the same time. Your primary mortgage follows standard conventional guidelines: most lenders want a credit score of at least 620 and a debt-to-income ratio under 50%. The second mortgage has tighter rules. Many HELOC lenders look for a credit score of 680 or higher, and they may cap your DTI at 43%. You'll need to show steady income, enough cash for the down payment, and reserves to handle both monthly payments. AmeriSave's loan team can review your full financial picture and tell you where you stand on both fronts before you start house hunting. Keep in mind that you'll also pay closing costs on each loan. The fees on the second mortgage are usually smaller because the loan amount is smaller, but they still add up. Ask your lender for a detailed breakdown so you can factor those costs into your budget. The Bottom Line A piggyback loan can be a smart way to keep more cash in your pocket while avoiding PMI. The math works especially well if you have 10% down, good credit, and a plan to pay off the second loan within a few years. But two loans come with two sets of costs and two sets of rules, so you need to look at the full picture before you commit. Compare the total monthly payment of a piggyback against a single loan with PMI. Run the numbers over your expected time in the home. AmeriSave can help you do exactly that, so you know which option actually saves you money.