Piggyback

Piggyback loans (also known as 80-10-10s) allow you to split your payments into a first and second mortgage. This allows you to avoid paying mortgage insurance.

80-10-10: This means the loan is 80% first mortgage, 10% second mortgage and 10% cash down payment. This is helpful if you can’t afford a 20% down payment and want to avoid expensive private mortgage insurance costs.

Since the second lender is only lending you a small amount of money, he/she will want to make more money by charging higher interest. Your two loans combined will probably be more expensive than just having one.

• This can help you save on down payment and mortgage insurance costs.

• You have two loans to pay off, instead of one. As a result, your monthly payments will probably be higher.
• It is harder to qualify for this kind of mortgage than a traditional mortgage. You usually need a credit score of 680 and a low debt-to-income ratio.
• If you have an emergency and need to use the equity in your home, it will be much harder to qualify for a home equity loan, since you already have two mortgages.