Piggyback Loans: 80-10-10 and Avoiding PMI
October 22, 2026
A piggyback loan is a second mortgage that closes with your first. The first loan covers most of the purchase. The smaller second loan sits behind it and funds part or all of the down payment.
People use it for two reasons: keep the first loan at 80% of the price so that lender does not charge PMI, or bring less cash to closing when USDA or VA is not available. Each loan has its own rate, term, and payment.
The two loans are separate agreements, often with separate lenders. The second lender agrees to be paid only after the first lender if you default, so the second rate is usually higher. That tradeoff has to beat PMI, or beat waiting until you have a larger down payment, before the structure is worth it.
The two problems it solves
- Avoid PMI. Keep the first loan at 80% loan-to-value. The second loan covers the gap between 80% and the cash you actually have.
- Cover the down payment. Use the second loan for some or all of the cash due at closing, including a true zero-down 80-20 when a lender will still do one.
Common structures
The first number is the first mortgage, the second is the piggyback, and the last is cash. All three are shares of the purchase price.
| Structure | First mortgage | Second loan | Cash down | Best for |
|---|---|---|---|---|
| 80-10-10 | 80% | 10% | 10% | Avoid PMI with a manageable down payment. This is the common version. |
| 80-15-5 | 80% | 15% | 5% | Less cash than 80-10-10, still no PMI on the first loan. |
| 80-20 | 80% | 20% | $0 | Zero cash down. Harder to find, and it takes strong credit plus two lenders. |
Why the closing takes a broker
Not every lender will hold a second lien on a purchase, and the ones who will do not always advertise it. A broker who has closed these deals knows who will sit behind someone else’s first mortgage and how to line the two disclosures up.
What one bank can do
- Sell only that institution’s products
- Offer a second mortgage only from its own portfolio
- Decline to place the second loan with a different lender
- Skip options it does not sell, including USDA, VA, or FHA when those would cost less
What a broker is for
- Shop the first and second loans across a lender network
- Find second-lien lenders that do piggybacks on purchases, not only standard HELOCs
- Keep both lenders disclosed to each other so both underwrite the combined loan-to-value
- Check whether USDA, VA, or FHA is the cheaper path before anyone structures a second lien
Both lenders are required to know about the other lien. A single bank usually cannot run that coordination.
What you gain and what it costs
Advantages
- No PMI on the first mortgage when that loan stays at or below 80% loan-to-value
- A path to little or no cash down when you do not qualify for USDA or VA
- No location test and no income limit, unlike USDA
- The second loan can sometimes be paid off early, which cuts the extra interest
Costs and risks
- The second loan’s rate is typically higher than the first, often in line with a HELOC
- Two payments and two sets of closing costs
- Credit, income, and debt-to-income are reviewed twice
- If the value drops, you are exposed on two loans
- A later refinance needs the second lienholder to subordinate, or you pay that loan off
- Fewer lenders offer purchase piggybacks than before 2008, especially at $0 down
Other ways to put less cash down
USDA and VA are usually the cheaper $0-down path: one loan, lower fees, no second-mortgage rate. A piggyback is the fallback when those programs do not fit.
- USDA is $0 down for eligible rural and suburban properties, with county income limits. One loan, no PMI.
- VA is $0 down for eligible veterans and service members, with no PMI and no income limit.
- FHA is 3.5% down with more flexible credit. Gift funds can cover the down payment. The cost is mortgage insurance, not a second loan. See how MIP works.
Key takeaways
- A piggyback is a second mortgage closed at the same time as the first
- 80-10-10 is the common structure: 80% first, 10% second, 10% cash, and no PMI on the first loan
- 80-20 can mean $0 cash down, and it is much harder to find
- The second rate is usually higher, so compare that payment with the PMI you would have paid
- Check USDA and VA before you take on two loans
- The closing needs a broker who can place both liens
Common questions
What is a piggyback loan?
A piggyback loan is a second mortgage taken out at the same time as the first. Together the two loans reduce the cash you bring to closing, or they keep the first loan at 80% of the price so the first lender does not charge PMI. The usual version is 80-10-10: an 80% first mortgage, a 10% second loan, and 10% cash.
How does an 80-10-10 loan work?
You borrow 80% on the first mortgage, 10% on the second, and pay 10% in cash. The first loan sits at 80% loan-to-value, so that lender does not require PMI. The second loan is often a home equity loan or HELOC with its own rate, usually higher than the first. You make two payments and pay two sets of closing costs.
Can a piggyback loan get me to $0 down?
An 80-20 structure can: the first mortgage covers 80% and the second covers 20%. That was common before 2008 and is harder to find now. Lenders who still offer it want strong credit and separate qualification on both loans. USDA and VA are usually the simpler $0-down path when you qualify for them.
Why does this take a broker instead of one bank?
A piggyback often needs two lenders: one for the first mortgage and one willing to sit in second position. A bank sells its own products and will not place the second loan with a competitor. A broker can shop both sides, confirm the first lender allows the second lien, and make sure both underwrite with the full picture.
Do both lenders know about each other?
Yes. Both liens have to be disclosed. The first lender’s guidelines may limit which second-lien products are allowed, and the second lender underwrites the combined loan-to-value. Coordination is the job. It is a normal two-loan purchase, not a workaround.
How does a piggyback compare with PMI?
PMI is an insurance premium on a first loan above 80% loan-to-value. It protects the lender. A piggyback avoids that premium by keeping the first loan at 80% and financing the gap with a second loan. The second loan has its own rate and payment, so it can cost more than the PMI it replaces. On a $400,000 purchase with 10% down, PMI might run about $150 to $250 a month. Compare that with the second loan’s payment before you choose.
How does a piggyback compare with USDA or VA?
USDA and VA are usually simpler and cheaper when you qualify. USDA is $0 down with income and location limits. VA is $0 down for eligible service members and veterans, with no income limits. A piggyback has no location or income test, and it works on property types those programs may not. You pay for that flexibility with a second rate and a harder closing.
Can I refinance out of a piggyback later?
Yes, with an extra step. The second lienholder has to agree to subordinate to a new first mortgage, or you pay the second off with the refinance. That is easier if the home has appreciated. Some people pay the second down early, then refinance the first on its own.