PiggyBack Loans on the Cheap!
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How Piggy Back Loans Work
With a piggy back loan, the homebuyer takes out two separate loans to finance the home purchase. The primary mortgage typically covers 80% of the home’s value, while the second loan (the “piggy back”) covers the remaining 10-20% down payment. This allows the buyer to avoid the added cost of PMI, which is required when the down payment is less than 20% of the home’s value.
The two loans are structured as separate financing agreements, but they work together to provide the necessary funds for the home purchase. The primary mortgage has a lower interest rate, while the second loan has a higher rate to compensate for the increased risk.
The Piggy Back Loan Process
Here’s how our home loan process works:
- Application: Apply for two loans simultaneously — one covering 80% of the home’s price and another for 10%, with a 10% down payment.
- Approval: Both loans undergo separate approval processes based on creditworthiness and financial stability.
- Closing: Finalize both loans at closing, signing necessary documents for each.
- Repayment: Make monthly payments on both loans until fully repaid.
