DEFINITION of 'Piggyback Mortgage'

A type of mortgage where a second mortgage or home equity loan is taken out by a borrower at the same time the first mortgage is started or refinanced. Piggyback mortgages are frequently used to lower the loan-to-value ratio (LTV) of a first position mortgage to under 80%, thereby eliminating the need for private mortgage insurance (PMI).

BREAKING DOWN 'Piggyback Mortgage'

Before using a piggyback mortgage to lower the loan to value ratio of the first mortgage to levels under 80% (to avoid PMI), a borrower should consider that a piggyback mortgage usually has a higher interest rate than a single, stand-alone first mortgage. If borrowers expect that their home will appreciate in value quickly (so that the LTV will not be higher than 80% for long), paying PMI for a period of time might be more economical than using a piggyback loan.

"80-10-10" is a common form of piggyback mortgage: where 80% of the property is covered by the first mortgage, 10% of the property's value is derived from the second loan and the final 10% is covered by the borrower's down payment.

RELATED TERMS
  1. 80-10-10 Mortgage

    A mortgage transaction in which a first and second mortgage are ...
  2. Junior Mortgage

    A mortgage that is subordinate to a first or prior (senior) mortgage. ...
  3. First Mortgage

    A mortgage in a first lien position on the property that secures ...
  4. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
  5. Lender-Paid Private Mortgage Insurance

    Private mortgage insurance that a mortgage lender pays on behalf ...
  6. Combination Loan

    1. A transaction consisting of two separate loans for the same ...
Related Articles
  1. Insurance

    How to Outsmart Private Mortgage Insurance

    It's possible to use a second mortgage to avoid this fee, but is it in your best interest?
  2. Personal Finance

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
  3. Personal Finance

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
  4. Investing

    Financing Basics For First-Time Homebuyers

    If you're looking to get your first mortgage, there are many financing options available.
  5. Financial Advisor

    Reverse Mortgages: Right for Clients? Not Often

    Reverse mortgages are a legitimate vehicle for folks age 62 and up to tap into the equity in their homes for other uses. Here's what to consider with them.
  6. Retirement

    Additional Streams of Income for Seniors

    Find out how a reverse mortgage can work in your favor during retirement.
  7. Personal Finance

    Understanding the Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  8. Personal Finance

    Behind the Scenes of Your Mortgage

    Four major players slice and dice your mortgage in the secondary market.
  9. Personal Finance

    Top 6 Mortgage Mistakes

    These common errors could end in foreclosure.
  10. Insurance

    6 Reasons to Avoid Private Mortgage Insurance

    This costly coverage protects your mortgage lender - not you.
RELATED FAQS
  1. How can I avoid paying private mortgage insurance (PMI)?

    Private mortgage insurance (PMI) is an insurance policy that protects lenders from the risk of default and foreclosure, and ... Read Answer >>
  2. Why do I need to pay private mortgage insurance (PMI)?

    The extra interest payments caused by private mortgage insurance may seem excessive, but there's a good reason lenders need ... Read Answer >>
  3. Why does the loan-to-value ratio matter?

    Learn how the loan-to-value (LTV) ratio is calculated, and why this metric is important to lenders when evaluating a home ... Read Answer >>
  4. How does the loan-to-value ratio affect my mortgage payments?

    Understand what the loan to value ratio is, how the ratio is calculated and learn how it has an impact on your mortgage payments ... Read Answer >>
Trading Center