The second trust (piggyback) loan

If you cannot afford a 20 percent down payment on your house, you may still be able to purchase a home. Depending on your financial picture, some lenders will allow smaller down payments — as little as ten percent in some cases. When you have a smaller down payment, however, you are usually required to carry private mortgage insurance (PMI), which means you may be required to make an initial premium payment and pay additional monthly fees on top of your regular mortgage payment.

If these extra charges don’t sound appealing to you, you may consider a second trust loan, also known as a piggyback loan.

What is a piggyback loan?
A piggyback loan is a combination of two loans that close at the same time to purchase a home. The most common piggyback loan is an 80/10/10.

  • 80 percent of the home’s value is financed through a first mortgage.
  • The remaining 20 percent is equally divided between a second, piggyback, loan and the down payment.


Purchase price First mortgage amount Down payment Piggyback loan amount
$200,000 $160,000 (80%) $20,000 (10%) $20,000 (10%)

Piggyback loans vs. private mortgage insurance
As with every financial option, there are pros and cons associated with both piggyback loans and PMI. Before deciding to select a piggyback loan instead of PMI, you should consult with a financial professional. Choosing the option that’s best for you depends on your individual financial situation and your state’s regulations.

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