Piggyback Loan

Also called a “purchase money second mortgage,” a piggyback loan is used by home-buyers with less than 20 percent down to avoid paying for private mortgage insurance (PMI).

A piggyback loan occurs when a borrower takes out two loans simultaneously: one for 80 percent of a home’s value, and the other to make up for whatever cash is lacking to make up a 20 percent down payment. This is used as an alternative to private mortgage insurance. A piggyback loan is also known as a second trust loan.