Should You Get a Piggyback Loan? Here’s When It Makes (and Doesn’t Make) Sense

Last updated 11/10/2025 by

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Summary:

A piggyback loan can save you money by avoiding PMI and keeping your main mortgage under conforming limits. But it also adds complexity and risk if your finances change. Learn when an 80/10/10 loan is a smart move — and when to skip it.

A piggyback loan — also known as an 80/10/10 mortgage — lets you use two loans to buy a home while avoiding private mortgage insurance (PMI). It can make homeownership more affordable for borrowers with strong credit, but it’s not the right fit for everyone.

Let’s explore when a piggyback loan makes sense and what to watch out for.

How a Piggyback Loan Works

A piggyback loan involves taking out two mortgages instead of one. Here’s how it typically works:

First loan (80%): Covers most of the home’s value and remains within conforming loan limits.
Second loan (10%): A smaller home equity loan or HELOC that “piggybacks” to cover part of the down payment.
Down payment (10%): You contribute 10% in cash to complete the purchase price.
PMI avoided: Because your first mortgage is only 80% of the home’s value, no PMI is required.

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When a Piggyback Loan Is a Good Idea

A piggyback loan can be a great choice under the right circumstances. It works best for borrowers who have strong credit, steady income, and short- to mid-term goals for the second loan.

You want to avoid PMI: PMI can add $100–$300 per month to your payment, so avoiding it offers instant savings.
You have solid credit: Scores of 700+ qualify for competitive rates on both loans.
You plan to pay off the second loan early: Paying it down in 3–7 years minimizes total interest.
You live in a high-cost area: It helps you stay within conforming loan limits while financing a pricier property.

Smart Move: Piggyback loans are most cost-effective for borrowers who plan to stay in their homes long enough to pay off the second loan or refinance once equity grows.

When a Piggyback Loan Is a Bad Idea

This strategy doesn’t work for everyone. A piggyback loan may not make sense if you prefer simplicity or have borderline credit qualifications.

You have a low credit score: Rates on the second loan can rise sharply if your credit is below 700.
You’re stretching your budget: Managing two loans increases your total debt and payment risk.
You plan to move soon: The short-term savings from skipping PMI may not outweigh the added closing costs.
You want an easy refinance later: Having two liens on your property can complicate future refinancing.

Who Should Avoid Piggyback Loans

While piggyback loans offer savings on PMI and flexibility for qualified buyers, they’re not ideal for everyone. You may want to explore other financing options if you fall into one of these categories:

First-time buyers with limited savings: Closing costs on two loans can add up quickly, eating into your budget.
Borrowers with variable income: Managing two payments can be stressful if your income fluctuates.
Short-term homeowners: If you plan to move within two to three years, the savings from skipping PMI might not offset the extra loan fees.
Buyers with weaker credit: You’ll likely face higher rates on the second loan, which can erase potential savings.

Smart Move: If you want lower upfront costs and a single loan, a conventional mortgage with temporary PMI may be the more practical choice.

Pros and Cons of Piggyback Loans

Here’s a quick overview of what to expect if you’re considering an 80/10/10 mortgage:

Example: Piggyback Loan vs. Single Loan with PMI

Let’s say you’re buying a $600,000 home with 10% down. Here’s how a piggyback loan compares to a single mortgage with PMI:

Scenario	Loan Setup	Monthly Payment	PMI
Piggyback Loan (80/10/10)	$480,000 first + $60,000 second	≈ $3,260	None
Single Loan + PMI	$540,000	≈ $3,300	$100–$150/mo until 20% equity

The difference may seem small month to month, but over time, skipping PMI could save several thousand dollars — especially if you pay off the second loan quickly.

Who Benefits Most from Piggyback Loans

This type of mortgage setup tends to favor borrowers who meet most of the following criteria:

Credit score of 700 or higher
Stable income and low debt-to-income ratio
At least 5–10% down payment saved
Plan to stay in the home for several years
Want to avoid the costs and restrictions of PMI or jumbo loans

Pro Tip: Piggyback loans work best when you can manage two payments comfortably and have a clear payoff strategy for the second loan.

Alternatives to Piggyback Loans

FHA Loan — 3.5% down, easier qualification, but requires mortgage insurance.
USDA Loan — 0% down and no PMI, available in eligible rural areas.
VA Loan — 0% down and no PMI for qualified veterans and service members.
Conventional Mortgage — Simpler structure with removable PMI at 20% equity.

How to Decide If It’s Right for You

Choosing whether to use a piggyback loan depends on your credit, down payment, and long-term plans. Ask yourself these questions before deciding:

Do I have a credit score of at least 700?
Can I comfortably manage two monthly payments?
Will I stay in this home long enough to benefit from PMI savings?
Do I have enough cash reserves for closing costs on two loans?
Can I pay off the second loan within 5–7 years?

If you answered “yes” to most of these, a piggyback loan may help you save money and maintain flexibility. If not, you might be better off with a single conventional mortgage or a government-backed loan.

The Final Word

A piggyback loan can be a great tool if you want to avoid PMI and stay under jumbo loan limits — as long as you’re comfortable managing two loans. For strong-credit borrowers who plan to pay off the second quickly, it can offer meaningful savings. But if you prefer simplicity or expect to refinance soon, a single mortgage with PMI may be the smarter path.

Key takeaways

Piggyback loans can help you avoid PMI and jumbo restrictions but require managing two mortgages.
They make the most sense for strong-credit borrowers planning to pay off the second loan quickly.
Low-credit or short-term buyers may find a single loan with PMI more practical.
Always compare total costs before choosing between piggyback and traditional mortgages.

Your Next Move

Compare piggyback loan options from top lenders to see if this dual-loan structure offers real savings in your situation.

Compare top-rated lenders on SuperMoney’s Best Piggyback Loans page to find the most competitive rates and terms for your next home purchase.

FAQs

Is a piggyback loan worth it?

It can be, especially if you qualify for good rates and plan to pay off the second loan early. The savings from avoiding PMI can add up over time.

What’s the downside of a piggyback loan?

Managing two loans can be more complicated, and the second loan usually carries a higher or variable interest rate.

Are piggyback loans hard to get?

They require strong credit (typically 700+), low debt-to-income ratios, and stable income — but qualified borrowers often find approval straightforward.

Can first-time buyers use piggyback loans?

Yes, if they meet lender requirements. Many first-time buyers use this setup to avoid PMI with smaller down payments.

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