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Piggyback Loan Calculator is used to calculate whether or not you will save money with a piggyback mortgage, or a regular mortgage with PMI payments. Should I get a piggyback mortgage? Find out now with our piggyback mortgage calculator.
A piggyback mortgage loan is a second mortgage taken out at the same time as the borrower's first mortgage. A piggyback mortgage is secured by the same collateral as the first mortgage. Common types of second mortgages or piggyback loans are home equity loans and HELOCs.
A piggyback mortgage is usually taken out to avoid private mortgage insurance or PMI for a mortgage. When a borrower makes a down payment lower than 20% on a conventional mortgage, most lenders require the borrower to pay for PMI to protect the lender in case the borrower defaults in the future. A piggyback mortgage allows a homebuyer to access additional funding for a larger down payment and eliminate PMI. In general, a homebuyer is only allowed to have one or two piggyback loans as the mortgages are secured by the same property.
There are different types of piggyback loans available. The most common ones are 80-10-10, 80-5-15, and 80-15-5. The first value of 80 is the percentage needed for the first mortgage that covers 80% of the home prices. The second value is the percentage for the second mortgage or the piggyback loan. The third value is the down payment the borrower will make on the first mortgage.
For example, an 80-10-10 piggyback loan means 80% of the home price goes to the first mortgage, 10% goes for the piggyback loan (could be a HELOC or a home equity loan), and the last 10% as the buyer's down payment for the property.
There are many advantages and downsides of a piggyback mortgage, following are the pros
Here comes a list of drawbacks of a piggyback loan.
The homebuyer will need to work out the math to see if a piggyback loan benefits them and makes sense. Add up all the closing costs and interest payments to find out whether getting a piggyback loan is cheaper than paying for PMI.
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