What's a Piggyback Mortgage?

Mortgage and Lending with Guaranteed Rate, Marin County, CA NMLS: 22343

What's a Piggyback Mortgage?


As if!  As if mortgages weren't complex enough, now you're going to tell me there's such a thing as TWO mortgages stacked on top of each other --- just to buy the same home you could otherwise get with one mortgage?  Are you a glutton for punishment?


OK, calm down.  You're correct about the part that adding a second, or "piggyback," mortgage might add complexity, but you're not quite right about the fact that our buyer could have just as easily killed the proverbial financing bird with one stone/loan.  Often, when we suggest borrower consider secondary financing, aka a piggyback loan, there's a good reason for it, and we're going to cover the top three of them below.  If you view piggyback loan options as another tool in the mortgage toolbox, then you'll start to see the value they provide when certain circumstances arise.  So let's jump into the mud with the pig.


Avoiding PMI

Most buyers are aware that once their loan-to-value (LTV) exceeds 80% (in other words, they have less than a 20% down payment), they will be faced with private mortgage insurance (PMI).  Some will therefore try to avoid this by breaking the financing into two loans, with the first mortgage at 80% of the value of the home, and the second or piggyback loan filling in the gap between the first mortgage and the buyer's down payment.  Classic example:  $500K purchase price and a 10% down payment ($50K).  The loan amount would be $450K and the buyer would have PMI, unless the buyer gets a first mortgage at $400K and a piggyback loan at $50K.  In the piggyback example, the buyer is still going to finance a total of $450K, but because his first mortgage LTV is not over 80%, there is no PMI.  Now, this same buyer will need to compare the terms of the financing.  Will it be better/cheaper to go with PMI or the piggyback?  Only the research will tell.


Circumventing Conventional Loan Limits

In the above example, we used a piggyback loan to avoid PMI, but what about purchase price points that would force an 80% LTV to be just above the conventional conforming loan limit?  Same deal.  Some of these buyers will circumvent that cutoff by using a piggyback.  Today, for instance, the conforming loan limit in many areas is $484,350.  But let's say the buyer is considering a home that will sell for $675K.  At 80% LTV, the loan amount would be $540K --- above the conforming loan limit by $55,650.  So, from time to time, we'll see a buyer get a $484,350 first mortgage coupled with a $55,650 second mortgage and voila', jumbo mortgage avoided.


Jumbo 80/10/10

Speaking of jumbo mortgages, especially in higher cost areas like the San Francisco Bay Area, even if you endeavor to buy a median-priced home with less than a 20% down payment, you will need a mortgage solution that often deviates from a single loan.  Jumbo 80-10-10 options have been popular in our neck of the woods since at least 2015 and the reasons for that are primarily that the terms are very competitive and there is no PMI.  If a buyer wishes to purchase real estate with less than 20% down and we're talking about price points up to $2MM, we almost always consider a piggyback loan as one of the first tier options.  In some parts of my county (Marin), in San Francisco, on the Peninsula and in the Silicon Valley, one can easily find a typical residence in the $1.2MM price point.  If you're putting 10% down on something like this, you'd have a first mortgage at $960K and a second mortgage, usually a HELOC, at $120K.  This would be contrasted with any other single-loan jumbo option, though as the price points increase, it gets harder to find and qualify for such programs for many buyers.


While we always try to keep matters as simple as possible, because we realize that real estate transactions are inherently complex, sometimes there's just no good way to avoid a piggyback mortgage solution.  When you find yourself in this situation, we can help and we offer a wide array of both first and second mortgage programs that can be combined together to meet your needs.  Oh, and when you do need a piggyback setup, we handle both loans as part of your singular process.  We don't send you out into the mud to fend for yourself on the first or second loan.  We've got your (piggy) back. 


Ha ha, charade you are, 



Robert J. Spinosa
Vice President of Mortgage Lending

Guaranteed Rate
NMLS: 22343 
Cell/Text: 415-367-5959 


Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960

Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate's Human Resources Department.


Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood ChicagoIL 60613 - (866) 934-7283


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Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
Marketing Agent for The Todaro Team

Good morning, Rob Spinosa  thanks for the information and education on piggy back mortgages.....

Jun 25, 2019 07:17 AM #1
Lottie Kendall
Compass - San Francisco, CA
Helping make your real estate dreams a reality

Hi Rob Spinosa - nice, clear explanation of piggy back mortgages. I seem to remember, as early as the late 1990s that 80/10/10 mortgages were often utilized in the Silicon Valley/Peninsula.

Jun 25, 2019 08:12 AM #2
Anna Banana Kruchten CRB, CRS 602-380-4886
Phoenix Property Shoppe - Phoenix, AZ
Arizona's Top Banana!

HI Rob Spinosa really good explanations of why folks would consider a piggy backed mortgage. I used to see them more often quite a number of years ago and it does look as if they're coming back into play once again.

Jun 25, 2019 09:09 AM #3
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Worthy of being a V.P. this Rob is....

Jun 25, 2019 01:30 PM #4
John Juarez
The Medford Real Estate Team - Fremont, CA

Thanks for the detailed, clear explanation about piggyback loans. I have seen many buyers use those products...mostly to avoid PMI.

Jun 25, 2019 04:14 PM #5
Matt Brady
Finance Of America - Del Mar, CA
Lending With Competence And Character

Since Jumbo rates are lower I would try to keep the loan above the conforming loan limit.

Jun 25, 2019 09:18 PM #6
Sham Reddy CRS
H E R Realty, Dayton, OH - Dayton, OH

Mortgage loans are complex already! But this might be a good idea!

Real estate transactions are inherently complex, sometimes there's just no good way to avoid a piggyback mortgage solution.


Jun 26, 2019 05:26 AM #7
Richard Bazinet /MBA, CRS, ABR
West USA Realty - Scottsdale, AZ
Phoenix Scottsdale. Sellers, Buyers & Relocations

Great post Rob. Appreciate the continuing education. I seem to remember that many years ago, that was a popular option.

Jun 26, 2019 05:51 AM #8
Joseph Domino 480-390-6011
HomeSmart - Scottsdale, AZ
Real Estate Made Easy

Good reminder to consider all options when financing a property.

Jun 26, 2019 07:44 AM #10
Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Property Manager

Hi Rob,
Always great for buyers to have the opportunity to work with someone as knowledgeable as you to come up with the best possible option!  Thanks for the info on piggybacks.

Jun 26, 2019 08:26 AM #11
Michael Eisenberg
eXp Realty - Bellingham, WA
Bellingham Real Estate Guy

I have seen buyers take out a second loan to avoid pmi in the past, but not recently.

Jun 26, 2019 10:31 AM #12
Kat Palmiotti
Grand Lux Realty, Monroe NY, 914-419-0270, kat@thehousekat.com - Monroe, NY
The House Kat

Interesting information about piggyback mortgages.

As for your Pink Floyd quote, I saw the "Animals" concert in the late 70s/maybe early 80s. As soon as I saw your words, I started singing in my head.

Jun 27, 2019 02:57 AM #13
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

This is another useful tool to be aware of...I'm sure there are times when it's the best option for buyers. You are a fount of great knowledge, Rob. Thank you. 

Jun 29, 2019 08:08 AM #14
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

Great illustrations and explanations. Does FHA allow piggy back loans?

Jul 14, 2019 03:44 PM #15
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Rob Spinosa

Vice President of Mortgage Lending, Marin County
Can I Get a Jumbo Loan with 10% Down?
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