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Piggyback loans help borrowers avoid private mortgage insurance (PMI) and jumbo loans, and may be worth considering if you're on solid financial footing and have a stellar credit profile. However, they're more difficult to qualify for than other types of mortgages and add complexity to the homebuying process that may outweigh the benefits.
Read on to learn how piggyback loans work, when they might be a good option, the pros and cons of getting one and alternatives to consider if you're looking to finance the purchase of a home.
What Is a Piggyback Loan?
With a piggyback loan, also known as an 80-10-10 loan, you take out two mortgages to buy a house. The first is a conventional mortgage for 80% of the home's purchase price. The second "piggybacks" onto the first and covers an additional 10% of the cost. The remaining 10% represents your down payment.
The secondary mortgage is usually a home equity loan or home equity line of credit (HELOC) that uses your home as collateral and typically has a higher interest rate than the primary mortgage. Some lenders may allow you to take out two loans at the same time, but you generally need to get the primary and secondary loans from different lenders.
Example: You want to purchase a home for $1 million, but don't want to take out a jumbo loan. If you opt to piggyback your loans, you will take out a conventional loan for $800,000, get a home equity loan for $100,000 and put down the last $100,000.
Learn more: What Is an 80-10-10 Mortgage Loan?
When Are Piggyback Loans a Good Idea?
Borrowers typically seek piggyback loans for two reasons: to avoid private mortgage insurance payments and to skirt the need for a costly jumbo mortgage on a property priced above other homes in the community.
PMI Avoidance
PMI helps protect lenders if you default on your mortgage, and it's typically required on conventional mortgages if your down payment is less than 20% of the home's purchase price. The annual cost of PMI generally ranges from 0.3% to 2% of the loan amount, and you must pay it until the loan-to-value (LTV) ratio reaches 78%. At that point, the lender removes it automatically.
Taking out a piggyback home loan instead of a single, larger mortgage nixes the PMI requirement since you're only borrowing 80% of the home's value on the primary mortgage.
To get an idea of how much you might save by not paying PMI on a conventional mortgage, here's a look at an example where the second mortgage is a home equity loan.
Example: Assume you are buying a home for $450,000, have a $45,000 down payment and qualify for a 6.5% interest rate. With a 30-year conventional mortgage, you would finance $405,000 and pay 1% each month for PMI, resulting in a monthly mortgage payment (excluding property taxes and homeowners insurance) of about $2,897 ($2,560 + $337).
If instead you get a piggyback mortgage loan with a primary 30-year mortgage of $360,000 at the same 6.5% interest rate, plus a $45,000 secondary 15-year mortgage at a 7.5% interest rate, the monthly payment would be $2,692 ($2,275 + $417).
The difference in the monthly payment is small, but in the time it would take to qualify for PMI removal on the conventional loan (about nine years), the piggyback mortgage could save you about $3,996 on your monthly payments.
Tip: The potential savings from a piggyback home loan with a HELOC as the secondary mortgage are less predictable because interest rates on a HELOC are typically variable.
Jumbo Loan Avoidance
Jumbo loans exceed the conforming loan limit that makes mortgages eligible for purchase by Fannie Mae and Freddie Mac, the government-sponsored enterprises that buy many home loans in the U.S. In 2026, the limit ranges from $832,750 to $1,249,125, depending on where you live.
Lenders take on more risk when they close a jumbo loan because they keep it on their books, leaving them on the hook if the borrower defaults. To help offset the added risk, lenders often impose stricter approval requirements compared to conforming loans, including larger down payments and higher credit scores.
A piggyback mortgage loan can help you bypass jumbo loan requirements if you use the primary loan to finance the first $832,750 to $1,249,125 of the purchase price and cover the rest (minus your down payment) with a secondary loan.
Learn more: Compare Current Jumbo Mortgage Rates
Piggyback Loan Requirements
To qualify for a piggyback home loan, you generally need:
- Good or excellent credit: Lenders typically require credit scores of 700 or above. The higher your scores, the more likely you are to qualify.
- Low debt-to-income ratio (DTI): Since a piggyback loan requires you to finance 90% of a home's purchase price, your DTI generally needs to be 43% or less. Some lenders may require a DTI as low as 36%.
- Down payment: You'll need to come up with a down payment of at least 10% to get a piggyback loan.
- Assets: Because piggyback loans have higher LTVs compared to conventional loans, you'll probably need to show you have adequate assets to help cover your mortgage payments if you hit a rough financial patch.
Pros and Cons of Piggyback Loans
All mortgages, including piggyback loans, have benefits and drawbacks. Here are some pros and cons of piggyback loans to consider.
Pros
You won't pay PMI. Because the primary mortgage doesn't exceed 80% of the home's purchase price, you can avoid paying PMI without a 20% down payment.
You may be able to deduct the interest. Interest charges on your second mortgage may be tax deductible up to the IRS limits.
You can avoid a jumbo loan. If you qualify for a piggyback mortgage loan, you can borrow larger amounts without having to meet jumbo loan requirements.
Cons
Your interest rate may be higher. The second mortgage often has a higher interest rate than the primary home loan. Additionally, if your second loan is a HELOC, the interest rate will likely be variable and unpredictable.
It can make refinancing difficult. You may need to pay off your second mortgage before you can qualify to refinance your primary mortgage.
Qualifying may be difficult. Piggyback loans aren't accessible to all borrowers. You typically need good or excellent credit and a low debt-to-income ratio to qualify.
It adds complexity. If you opt for a piggyback loan, you must meet two sets of lender requirements, coordinate two loan closings (on the same day) and pay two sets of closing costs. After settlement, you'll have two mortgage payments each month.
It increases your debt-to-income ratio. A piggyback loan may make it difficult to qualify for additional credit because it raises your DTI.
How to Apply for a Piggyback Loan
You can apply for a piggyback loan by taking the following steps.
- Research lenders. Not all lenders offer piggyback loans, so you may need to do some digging. When applying, let the lender know upfront how you plan to use the money. Depending on the institution, you may be able to get your first and second mortgages from the same company. However, it's more likely that you'll need to get the loans from two different lenders.
- Apply for preapproval. Getting preapproved gives you an idea of whether you'll qualify, your estimated loan amount and what you can expect your interest rate to be.
- Submit a formal application. During the application process, you'll need to show that you can comfortably handle the mortgage payments. The lender will check your credit and request copies of pay stubs, bank records and investment account statements plus a list of your current debt obligations.
- Close on the loans. If your application is approved, you'll need to coordinate with the lenders to arrange a settlement date because both loan closings must occur on the same day.
Alternatives to Piggyback Loans
Piggyback loans aren't right for everyone. Even if you can qualify for one, there may be better options available, including:
- FHA loans: These government-backed mortgages through the Federal Housing Administration (FHA) offer a smaller down payment and lower credit score requirements than conventional loans. However, you may have to pay mortgage insurance for the life of the loan, and maximum loan amounts are lower than those for conventional mortgages.
- VA loans: These mortgages are backed by the Department of Veterans Affairs (VA) and are available to eligible current and former military members and their families. VA loans usually have lower interest rates than conventional mortgages, no down payment requirement and no mortgage insurance. However, you'll have to pay a funding fee of 1.25% to 3.3% of the loan amount.
- USDA loans: Home loans guaranteed by the U.S.Department of Agriculture (USDA) allow low- and moderate-income borrowers to purchase a primary residence in designated rural and suburban areas. USDA loans typically have lower interest rates and more lenient credit scoring requirements than conventional loans. You don't need a down payment to get a USDA loan, but you have to pay a funding fee equal to 1% of the total loan amount at closing plus an annual fee of 0.35% of the remaining loan balance.
- Paying PMI: The PMI savings from a piggyback loan may not be worth the added complexity. Instead of getting a piggyback loan, you could pay PMI on a conventional mortgage, then make extra payments or pay more than the minimum due each month to reduce the time you have to pay PMI.
- Getting a jumbo loan: If you can meet a lender's requirements for a jumbo loan, getting a single loan may be a better option. Keep in mind you'll need good credit to qualify, lenders may require significant down payments and jumbo loans often have higher interest rates than conventional mortgages.
The Bottom Line
A piggyback loan may be a good option in certain situations for highly qualified borrowers. But before you opt for this strategy, map out the total costs of both mortgages (Experian's mortgage calculator can help) to determine whether a piggyback loan will save you money compared to a jumbo loan or traditional mortgage that requires PMI.
If you decide a piggyback loan is your best bet, check your credit before applying. While different types of mortgages make it possible for borrowers with a wide range of credit scores to own a home, piggyback mortgages are usually tougher to qualify for.
You can check your FICO® Score☉ Θ for free from Experian anytime. If you feel better credit scores would help your approval odds, start taking steps today to improve your credit score before applying.