Piggyback Loan (80-10-10) vs. Paying Private Mortgage Insurance
Buyers with less than 20% down on a conventional loan can either pay private mortgage insurance (PMI) or use a piggyback second loan to avoid it, splitting financing between a first and second mortgage.
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Piggyback Loan (e.g., 80-10-10)
A financing structure where a first mortgage covers a portion of the price (often 80%), a second smaller loan covers part of the down payment gap, and the buyer covers the rest in cash — avoiding PMI.
- Avoids monthly private mortgage insurance payments entirely
- Can reduce total monthly cost versus PMI in some rate environments
- Second loan typically carries a higher interest rate than the first mortgage
- More complex to arrange, coordinating two loans from often two lenders
- Two separate loans to manage, potentially with different terms
Paying Private Mortgage Insurance (PMI)
A single conventional loan where the buyer pays monthly PMI premiums until enough equity is built to have it removed.
- Simpler — a single loan with a single lender and set of terms
- PMI can typically be removed once sufficient equity is reached
- Often easier to qualify for than coordinating two simultaneous loans
- Adds a recurring monthly cost until equity thresholds are met
- No tax deductibility guarantee for PMI, which varies by year and circumstance
Which one makes sense for you?
PMI is the simpler, more widely available option and is often the default for buyers with less than 20% down, especially since it can eventually be removed. A piggyback loan can occasionally save money depending on relative rates, but adds complexity by requiring two coordinated loans — worth comparing actual quotes for both before deciding.
Key cost factors.
- Relative interest rates between a piggyback second loan and PMI cost
- How quickly you expect to build equity and remove PMI
- Your comfort managing two simultaneous loans
- Lender availability for piggyback structures in your market
Before you decide.
- What would the total monthly cost be under each structure, including the second loan's rate?
- How long would PMI likely stay on the loan given my down payment and expected appreciation?
- Are there lenders in my market currently offering piggyback structures?
Frequently asked questions.
Is PMI the same as homeowners insurance?
No — PMI protects the lender if the borrower defaults, while homeowners insurance protects the property itself against damage; they serve entirely different purposes and are both separate from each other.
All figures on this page are illustrative examples for general education, not quotes, appraisals, or guarantees of actual pricing. Actual costs vary by provider, location, project scope, and market conditions — always get a specific quote before making a purchasing decision.
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