A piggyback loan (or 80/10/10) is a mortgage strategy where you take out two loans simultaneously to purchase a home: a primary mortgage for 80% of the value and a second, smaller loan (piggyback) for 10%–15%, allowing for a 5%–10% down payment. It is primarily used to avoid private mortgage insurance (PMI) by reaching an effective 20% equity position immediately.
If you're planning to buy a home soon, you may be looking for ways to keep costs low. Using a piggyback mortgage structure can help you spread the financing for your home out across separate loans. This may help eliminate the need for a traditional down payment or private mortgage insurance.
A “piggyback” second mortgage is a home equity loan or home equity line of credit (HELOC) that is made at the same time as your main mortgage. Its purpose is to allow borrowers with low down payment savings to borrow additional money in order to qualify for a main mortgage without paying for private mortgage insurance.
Getting a piggyback loan can be slightly more difficult than applying for a traditional mortgage since you'll need to qualify for two loans at once. To make sure you're financially stable enough to handle two monthly payments, lenders will typically want to see a high credit score and a low debt-to-income ratio.
Borrowers often use piggyback mortgages to avoid paying private mortgage insurance on a conventional loan when putting down less than 20%. They can also leverage piggyback loans to reduce their down payment or buy a higher-priced home.
Piggyback mortgages are also called combination mortgages and simultaneous mortgages, and they can help certain borrowers buy the home of their dreams.
The 3-7-3 Rule in mortgages isn't a loan type but a federal timeline from the TILA-RESPA Integrated Disclosure (TRID) rule, ensuring borrower protection by mandating disclosures within 3 business days of application, a 7-business-day wait between the initial Loan Estimate and closing, and another 3-day wait if significant changes (like APR) occur, giving borrowers time to review costs before committing to a loan.
Legal use & context
Piggyback mortgages are commonly used in real estate transactions. They are relevant in the context of mortgage lending and financing, particularly for homebuyers who wish to minimize their upfront costs.
Government-backed mortgages limit you to one or two loans maximum under most circumstances. While the number of mortgages you can have depends on the loan type, lender and property you're buying, generally speaking, there is no legal limit for conventional mortgages on principal residences.
Also called an 80/10/10 or combination mortgage, a piggyback loan involves getting two loans at once to buy a home: one bigger loan and a second smaller one. The second, smaller loan essentially provides funds toward your down payment.
Monthly payments on a $70,000 mortgage vary significantly, but generally fall between $350 to $700+ for principal & interest, depending heavily on the interest rate, loan term (e.g., 15 vs. 30 years), and if property taxes/insurance are included, with typical rates (around 6-7%) on a 30-year loan landing in the $400-$500 range for P&I, while a shorter term or higher rate pushes payments up.
To pay off a 30-year mortgage in 10 years, you must make significantly larger payments by refinancing to a shorter term (like 10 or 15 years) or by aggressively making extra principal payments through methods like rounding up payments, making bi-weekly payments (which adds one extra payment yearly), using bonuses/tax refunds, and ensuring extra money goes directly to the principal, requiring substantial budget adjustments and discipline to significantly reduce the principal balance much faster than the original schedule.
The cheapest way to get equity out of a house is often a Home Equity Line of Credit (HELOC), due to lower upfront costs and paying interest only on what you use, but a Home Equity Loan (fixed rate, lump sum) or Cash-Out Refinance (if rates are lower) can be cheaper depending on market rates, while Sale-Leasebacks or Reverse Mortgages (for seniors) offer payment-free options with different trade-offs. Always compare lender fees, interest rates (variable vs. fixed), and your financial goals before choosing, as the "cheapest" option varies.
You generally need a credit score of at least 620 to qualify for a conventional mortgage, though every lender is different. FHA loans, which are backed by the federal government, may be an option for individuals with credit scores as low as 500.
However, most lenders still require your score to be at least 600 for an insured mortgage, even with a co-signer. How long does it take to raise my score enough to buy a home? Raising your credit score enough to buy a home (typically up to at least 600–680) can take anywhere from about 3 to 12 months.
Understanding Mortgage Affordability in Canada
For insured mortgages in Canada, CMHC recommends a maximum GDS ratio of 39%. For a $90,000 salary (which breaks down to $7,500 per month), this means your housing costs shouldn't exceed $2,925 per month.