Business, Legal & Accounting Glossary
A piggyback loan is a second mortgage used to add to the first mortgage on a home for which you need to finance more than 80 per cent. It “piggybacks” onto the first mortgage simultaneously. This first mortgage covers 80 per cent of the home’s price. The piggyback loan then covers the remainder of the financing. A common type of piggyback loan is the 80-10-10, which has a 10 per cent down payment and a 10 per cent piggyback loan. A significant advantage of a piggyback loan is that it does not require you to carry private mortgage insurance (PMI). Instead of paying a PMI premium, the extra payment for the piggyback loan builds equity. The interest on a piggyback loan is generally higher than the rate on the first mortgage, but a piggyback loan sometimes costs less than a single mortgage for over 80 per cent that also requires PMI. So, stacking the small mortgage of a piggyback loan can significantly reduce a borrower’s monthly payments. Additionally, piggyback loan payments are also tax-deductible.
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This glossary post was last updated: 6th February, 2020 | 0 Views.