What Is a Piggyback Mortgage? The 80-10-10 Loan Explained

What if you could put only 10% down on a home — but still avoid paying private mortgage insurance (PMI)? That's exactly what a piggyback mortgage lets you do. It's called '80-10-10' because you split the financing into two loans instead of one.

What Is a Piggyback Mortgage?

A piggyback mortgage is when you take two loans simultaneously to buy one home. The most common structure is 80-10-10: an 80% first mortgage, a 10% second mortgage (home equity loan or HELOC), and a 10% down payment from you.

Why Would You Do This?

The main reason is to avoid PMI. If you put less than 20% down on a conventional loan, lenders require private mortgage insurance — which typically costs 0.5%–1.5% of the loan annually. On a $400,000 home, that's $2,000–$6,000/year added to your payments. A piggyback mortgage eliminates PMI by keeping the first mortgage at or below 80% of the home's value.

How the 80-10-10 Works

• Home price: $400,000
• First mortgage (80%): $320,000 at 7.0% — monthly payment ~$2,129
• Second mortgage (10%): $40,000 at 8.5% — monthly payment ~$495
• Down payment (10%): $40,000 out of pocket
• No PMI: saves $167–$500/month compared to a single 90% LTV loan with PMI

Pros of a Piggyback Mortgage

• Avoid PMI — can save hundreds per month
• Buy sooner — don't need to wait to save 20% down
• Interest on second mortgage is often tax-deductible
• Keep cash available instead of tying it all up in a down payment

Cons of a Piggyback Mortgage

• Second mortgage rate is higher than first — often 8%–9%
• Two sets of closing costs
• If home value drops, you're underwater faster with more debt
• HELOC second mortgage may have a variable rate
• Harder to qualify — lenders assess both loans

Is a Piggyback Mortgage Right for You?

Run the numbers both ways. If PMI costs you $300/month and the second mortgage costs $495/month, you're paying more — not less. But if PMI would cost $450+/month and the second mortgage is $350/month, the piggyback wins. The math depends entirely on your loan size, rates, and PMI quote.