Using a First and Second Combination Mortgage to Avoid Jumbo Guidelines

What are Piggyback loans?

A piggyback loan is when a borrower takes out two mortgages at once. This type of loan is used by borrowers who don’t have a 20% down payment, and they want to avoid paying private mortgage insurance (PMI). The second mortgage is in the form of a home equity loan or line of credit. Most lenders require private mortgage insurance when the borrower makes a down payment of less than 20%. Piggyback loans are a way to get around this requirement.

A piggyback loan is an option for a borrower who wants a conforming loan but needs to borrow more than the conforming loan limit of $417,000. A mortgage for an amount greater than the conforming limit is called a jumbo loan, and these loans usually have higher interest rates.

Do a cost comparison because it may cost less to get a jumbo mortgage for the full amount, or it may cost less to split the payment between a conforming loan and an adjustable-rate home equity line of credit or a fixed-rate home equity loan.