What is a piggyback loan (80-10-10 mortgage)?

A piggyback loan is a combination of two mortgages taken simultaneously to avoid PMI or reduce the loan amount. The most common structure is the 80-10-10: an 80% first mortgage, a 10% second mortgage (home equity loan or HELOC), and a 10% down payment. By keeping the first mortgage at or below 80% LTV, you avoid PMI. The second mortgage typically carries a higher interest rate than the first. Another common structure is the 80-15-5 for buyers with only 5% down. While this avoids PMI, the combined payment and interest from both loans may end up costing more than just paying PMI, so run the numbers carefully.