The piggyback loan is used for eliminating the private mortgage insurance premium when the down payment is less than 20% for a "conventional" mortgage. The piggyback 2nd mortgage cannot be used on the government backed home loans (i.e. FHA, VA, USDA). Why would I take out two mortgages to buy a house? Sounds crazy, I know.
A piggyback loan will help the borrower bypass the obligation of mortgage insurance by placing an addition lien on the property. Borrowers may have the option of a fixed rate or an adjustable, and the loan can be obtained by the same lender or by an additional lender.
Below are the main types of piggyback loan programs that lenders offer. There used to be a 80/20 program (80% as a first mortgage, and 20% as a second mortgage, which meant you could borrow 100% of the loan amount), but unfortunately, the 80/20 program no longer exists.
A piggyback loan (aka second trust loan) is using two loans to finance the purchase of one house with less than 20 percent equity. The most common piggyback mortgage is an 80/10/10 loan. The most common piggyback mortgage is an 80/10/10 loan.
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· A piggyback loan is actually two mortgage loans, used to solve a client’s problem. The second mortgage is metaphorically “piggybacking” on the first; the two combine to make a loan equal to the amount the client wants to borrow.
However, smaller down payments mean greater risk for lenders, so you’ll generally have to pay some type of mortgage insurance on the loan. Borrowers who are averse to the additional cost of mortgage insurance but are keen to buy a house without a 20% down payment have another option as well: an 80-10-10 loan, also known as a piggyback mortgage.
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A COMBO LOAN (AKA PIGGYBACK MORTGAGE) A piggyback involves two separate loans simultaneously. In this scenario, the first “primary” mortgage covers 80 percent of the loan with a 30-year fixed interest.
Piggyback Mortgage Option. Lenders refer to this strategy as a piggyback mortgage arrangement. For example, the buyer puts up a 10 percent down payment, takes an 80 percent conventional mortgage, and funds the remaining 10 percent with a second mortgage. A lender would call this arrangement an 80-10-10 piggyback mortgage.
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