What Is a Piggyback Loan?

A piggyback loan is a second mortgage (either a Home Equity Loan or a HELOC) taken out at the same time as your first mortgage. By splitting the financing, you can optimize pricing, guidelines, and monthly cost.

From your notes (and we agree):

• Avoid jumbo loan complications. Break your loan into a first mortgage and a simultaneous piggyback second mortgage to avoid jumbo loan pricing and some guideline limitations.

• Eliminate private mortgage insurance (PMI). Keep your first mortgage at or below 80% of the purchase price and use a piggyback loan to cover part of the down payment.

• Reduce your down payment. Free up cash for moving costs, landscaping, furniture, or appliances—without pushing your first mortgage over 80%.

Whether you’re purchasing or refinancing, a piggyback structure could be the right fit.

Common Piggyback Structures (Examples)

• 80/10/10: 80% first, 10% second, 10% down

• 80/15/5: 80% first, 15% second, 5% down

• 75/15/10 (refi scenarios): Especially when consolidating or removing PMI

These are examples only—actual ratios vary by lender, program, property type, and profile.

Why Homebuyers & Owners Use Piggybacks

1. Avoid PMI
   Keep the first mortgage at ≤ 80% LTV to remove monthly PMI while still putting less than 20% down overall.

2. Sidestep Jumbo Pricing
   In higher-cost markets, splitting the loan may keep the first inside conforming loan limits, often with better pricing and broader guideline options than going full jumbo.

3. Lower Cash to Close
   You can put 5–10% down in many scenarios yet still avoid PMI, preserving savings for repairs, upgrades, or reserves.

4. Payment Flexibility
   Choose between a fixed-rate second (predictable) or a HELOC (flexible access/debt-reduction strategy).

5. Refinance Strategy
   Already own a home? A piggyback can help remove PMI without jumping to jumbo or can be used to access equity more strategically.

HELOC vs. Fixed-Rate Second: Which Fits You?

HELOC (Home Equity Line of Credit)

• Revolving line; draw what you need.

• Typically variable rate; payment may change with the market.

• Great for staged projects or future access to funds.

Fixed-Rate Home Equity Loan (Second Mortgage)

• Lump sum at closing.

• Fixed rate and predictable payments.

• Ideal if you know exactly how much you need—no surprises.

When a Piggyback Shines

• You’re close to 20% down but prefer to avoid PMI and keep extra cash.

• You’re in high-cost California markets (Victorville, Apple Valley, Hesperia, Big Bear, greater High Desert) where a jumbo loan might be pricier or stricter.

• You expect bonuses/commissions or future cash to pay down the HELOC quickly.

• You’re refinancing to remove PMI but keeping the first mortgage ≤ 80% yields better pricing.

What to Watch Out For (Trade-Offs)

• Two Loans = Two Payments. You’ll make a first-mortgage payment and a second-mortgage/HELOC payment.

• Variable-Rate Risk (HELOCs). If rates rise, your HELOC payment can increase.

• Closing & Ongoing Costs. There may be separate fees for the second; HELOCs may include annual fees or draw period rules.

• Refinance Logistics. If you later refinance the first, the second-lien holder may need to subordinate—a step that can add time and paperwork.

• Underwriting Still Applies. Credit, income, assets, property type, DTI/CLTV limits, and occupancy rules still matter.

Quick Scenario (Illustrative Only)

• Purchase Price: $600,000

• 80/10/10 Setup:

  • First Mortgage (80%): $480,000 (no PMI)

  • Second Mortgage/HELOC (10%): $60,000

  • Down Payment (10%): $60,000

You avoid PMI on the first, keep cash needs to 10% down, and potentially dodge jumbo pricing. Actual rates, payments, and costs depend on market conditions and your qualifications.

Eligibility Snapshot (Varies by Program)

• Credit: Programs often favor strong mid-scores (exact thresholds vary).

• Debt-to-Income (DTI): Must support both payments.

• Combined LTV (CLTV): Total of first + second vs. property value must meet program limits.

• Property Types: Single-family, some condos/PUDs; 2–4 units and second homes/investment properties may be available with additional rules.

• Occupancy:Owner-occupied most common; options may exist for second homes or investment with different pricing/terms.

Piggyback vs. Single Loan with PMI vs. Jumbo (At a Glance)

• Piggyback: No PMI on the first, potentially better pricing than jumbo, but two payments and possible HELOC variability.

• Single Loan + PMI: One payment and simple setup; PMI adds cost until removed.

• Jumbo: One loan with no PMI, but may have tighter guidelines and different pricing than conforming.

The best choice depends on your down payment, credit profile, goals, and time horizon.

FAQs

Can I pay off the second early?
Often yes—no-prepayment-penalty options exist, especially on HELOCs, but always confirm your terms.

Will a piggyback hurt my ability to refinance later?
Not necessarily. If you refinance the first, the second typically needs to subordinate—we handle that coordination for you.

Is interest on a HELOC or second mortgage tax-deductible?
Sometimes when funds are used to buy, build, or substantially improve the home securing the loan. Consult a tax pro.

Can I use a piggyback on a condo or 2-unit?
Often yes, subject to program and condo project approvals.

Ready to See If a Piggyback Fits?

At Mojave River Mortgage, we’ll compare piggyback vs. single-loan + PMI vs. jumbo side-by-side so you can choose with confidence.

Want to learn more? Let’s chat!
Schedule a 10-minute strategy call and get a personalized side-by-side with payments, cash to close, and break-even points.

Compliance & Disclaimers

Mojave River Mortgage — NMLS #1884727 • DRE #01854568. Equal Housing Lender. Not a commitment to lend. All loans subject to credit approval, property approval, and program availability. Terms, rates, and guidelines subject to change without notice. This is general information, not legal or tax advice.