What is a Piggyback Loan?

Piggyback loans increased in popularity a few years ago when interest rates were at historic lows. They provided borrowers a way to buy a home without putting 20% down or without the need for mortgage insurance.

How it works
The borrower takes out two loans at the same time: the first at 80% of the property's value; and a second mortgage piggybacked onto the first for the remaining 10, 15 or 20% of the property value.

As interest rates are continuing to move back toward more traditional levels, piggybacks are not the great deal they once were. Today, MGIC offers options that compete very favorably to piggyback loans.

However, old habits die hard and some mortgage professionals have not come to understand the MI advantage. It is no longer necessary for borrowers to go through the hassle of taking out two loans to get the best deal for their mortgage.

As a borrower, understanding your options is now more important than ever before.