What Is a Piggyback Loan (80/10/10) in Real Estate?

A piggyback loan—commonly called an 80/10/10 loan—uses two mortgages to help a buyer avoid private mortgage insurance (PMI), lower their down payment, or stay under certain loan limits. It splits the financing into an 80% first mortgage, a 10% second mortgage, and a 10% down payment.

✅ How an 80/10/10 Piggyback Loan Works

A piggyback loan combines two mortgages:

  • 80% — primary mortgage
  • 10% — second mortgage or HELOC
  • 10% — buyer’s down payment

This structure allows buyers to keep the primary mortgage at 80%, avoiding PMI while reducing the required upfront cash.

Example on a $500,000 home:

  • 1st mortgage: $400,000 (80%)
  • 2nd mortgage/HELOC: $50,000 (10%)
  • Down payment: $50,000 (10%)

📊 Why Buyers Use Piggyback Loans

Piggyback loans help buyers who want to avoid PMI or reduce upfront costs. They also offer strategic flexibility in competitive markets.

  • Avoid PMI: Keeping the first mortgage at 80% eliminates mortgage insurance.
  • Reduce down payment: Only 10% down instead of 20%.
  • Stay under loan limits: Helps buyers avoid jumbo loan requirements.
  • Improve cash flow: Buyers can keep more money in reserves.

💡 Pros & Cons of Piggyback Loans

Pros:

  • No PMI
  • Lower required down payment
  • May avoid jumbo loan interest rates
  • Flexible structure using HELOCS or fixed second loans

Cons:

  • Second mortgage often has a higher interest rate
  • Two monthly payments to manage
  • HELOCs may have variable rates
  • More complex underwriting

🏡 Piggyback Loans & FSBO Transactions

When evaluating buyers, FSBO sellers should understand that piggyback financing is legitimate but adds complexity. Buyers using an 80/10/10 loan may require more documentation and slightly longer processing times.

However, these buyers often bring stronger financial profiles—they’re usually avoiding PMI strategically, not due to lack of funds.

For more financing topics, see the Mortgage Guide.