Piggyback Mortgage


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.

  1. Private Mortgage Insurance - PMI

    A policy provided by private mortgage insurers to protect lenders ...
  2. Mortgage

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  3. Lien

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  4. Second Mortgage

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  5. Second Lien Debt

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  6. Home-Equity Loan

    A consumer loan secured by a second mortgage, allowing home owners ...
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  1. How many FHA loans can I have?

    Generally, the Federal Housing Administration (FHA) does not insure more than one mortgage per borrower. This is to prevent ... Read Full Answer >>
  2. Are FHA loans assumable?

    Loans insured by the Federal Housing Administration (FHA) on or after Dec. 15, 1989, are assumable by qualifying borrowers. ... Read Full Answer >>
  3. How accurate are online mortgage calculators?

    Online mortgage calculators are accurate to the extent that the calculator itself is asking for the right pieces of information ... Read Full Answer >>
  4. Are mortgage rates negotiable?

    Mortgages are just as negotiable as any other product or service. Whether it's a new home purchase or refinancing of an existing ... Read Full Answer >>
  5. Are FHA loans fixed?

    An FHA loan is a mortgage loan backed by the government that offers more flexible lending requirements than those of conventional ... Read Full Answer >>
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