Piggyback Loan (80-10-10): Skip PMI Without 20% Down

Private mortgage insurance is the price of putting down less than 20% on a conventional loan. As the CFPB explains, PMI protects the lender, not you, and you pay for it every month until the loan drops to 80% of the home’s value. A piggyback loan is the oldest workaround in the book: keep the first mortgage at exactly 80%, borrow the rest on a second lien, and there is nothing for the insurer to insure.

Whether that trade wins depends on three numbers: the rate on the second loan, the PMI rate you would have paid, and how long the PMI would have lasted. This guide prices all three, state by state, and shows where the split stops paying off. First, a short explainer on how the 80-10-10 structure works in a 2026 purchase.

1. What Is a Piggyback Loan? The 80-10-10 Structure Explained

Quick Answer: A piggyback loan is two mortgages closed on the same day. The first covers 80% of the purchase price. The second, usually a home equity loan or a HELOC, covers 10%. You bring the last 10% as a down payment. Because the first lender’s loan-to-value is 80%, PMI is not required. Our guide to how mortgages work covers the first lien; this page covers the stack.

The name comes from the second loan riding on top of the first. Lenders call the split by its shares of the price: 80-10-10 is the standard, 80-15-5 is the version for buyers with only 5% down. The table lines up both against the two loans they replace.

Two rules shape every piggyback loan. Under the Fannie Mae Selling Guide, the first lender must count the second lien in the combined loan-to-value ratio and disclose it to the appraiser and to Fannie Mae, so the second loan is never a secret from the first. And both payments count in the debt-to-income ratio, which means a piggyback loan does not let you buy more house than a single loan would.

The second lien is usually a fixed-rate home equity loan or a HELOC from the same lender or a partner bank. A fixed second gives you a known payment; a HELOC starts cheaper but floats with the prime rate.

2. Piggyback Loan vs. PMI: Monthly Cost by State

Quick Answer: With 10% down on the typical home, an 80-10-10 piggyback loan with a 9% second lien runs $33 a month less than a 90% loan with PMI in Ohio, $40 less in Texas, $50 less in Florida, and $102 less in California. The edge scales with the price, which is why the DollarVisor loans hub prices every home-loan choice state by state.

The chart models one buyer in each of the ten states we cover. They have 10% down and a first-lien rate of 6.75%, close to where the Freddie Mac weekly average has sat in September 2026. Path one is the piggyback loan: 80% at 6.75% over 30 years plus 10% on a 20-year second at 9%. Path two is a single 90% loan at 6.75% with PMI at 0.51% a year, the example rate in Freddie Mac’s PMI guide.

The gap is real but modest, and it hides a difference in what the money buys. The 20-year second lien pays down principal faster than a 30-year loan, so part of the piggyback payment is building equity, while every dollar of PMI is gone. Section 3 separates cost from principal to show the true difference over time.

3. The 10-Year Math: What Happens When PMI Cancels

Quick Answer: PMI is temporary; the second lien’s higher rate is not. On the typical U.S. home, the piggyback loan is $4,851 ahead in interest and PMI after five years. If home prices rise 3% a year, the PMI borrower can cancel at year five, and the lead shrinks to $2,637 by year ten. Our guide on how to get rid of PMI covers the cancellation rules that set that clock.

The fair comparison is cost, not payment: interest on both piggyback liens against interest plus PMI on the single loan. The table tracks both on the U.S. home, with PMI cancelled at year five under Fannie Mae’s rule that a loan seasoned two to five years can drop PMI at 75% of current value, per the Fannie Mae Servicing Guide.

Read the last column as a curve, not a verdict. The piggyback loan’s lead peaks the year PMI ends and then gives back about $94 a month, the difference between the 9% second lien and the now-insurance-free 90% loan. Paying the second lien off early, or refinancing it into the first when rates allow, stops that drain; our guide on when to refinance your mortgage has the break-even math for that step.

4. Second-Lien Rate vs. PMI Rate: The Break-Even Table

Quick Answer: A piggyback loan beats PMI whenever the gap between the second-lien rate and the first-lien rate is less than about nine times the PMI rate. At 0.51% PMI, that means a second lien under roughly 11%. At 0.36% PMI, the second must be under about 9%. Your PMI quote depends on credit score and down payment, the same inputs behind our guide to how much down payment you need for a house.

Freddie Mac’s PMI guide puts monthly PMI between $30 and $70 per $100,000 borrowed, or about 0.36% to 0.84% a year. The table runs the U.S. home through three PMI tiers inside that range against three second-lien rates.

The lesson runs the other way for buyers with thin credit. A borrower quoted 0.84% PMI saves $92 to $187 a month with a piggyback loan, even at an 11% second lien, because PMI is priced on the full 90% loan. A borrower with excellent credit and a 0.36% quote has almost nothing to gain unless the second lien comes in near 7%.

5. The Catches: Two Lenders, Two Closings, and the Tax Angle

Quick Answer: A piggyback loan means two applications, two sets of closing costs, and a second lien that can float with the prime rate and must be subordinated every time you refinance the first. The 2026 tax rules also narrowed the piggyback’s edge: PMI is deductible again for itemizers, subject to income limits. Budget the extra fees in your cash to close before you commit.

Most of the regret comes from the second lien, not the first. Watch for these five:

• Two closings, two sets of fees. The second lien adds its own origination, title, and recording charges on top of the ones in our guide to closing costs explained. Get both Loan Estimates side by side.
• A HELOC second can rise. A HELOC floats with the prime rate. If prime climbs two points, so does your second-lien rate, and the Section 4 math tips toward PMI. A fixed-rate second costs a little more up front and removes that risk.
• Refinancing gets harder. To refinance the first lien, the second lender must sign a subordination agreement to stay in second place. Some refuse, some charge, and it adds weeks. Rolling both liens into one new loan works only if the combined balance is under 80% of the new value.
• The tax edge is smaller than it was. Under IRS Publication 936, interest on a second lien used to buy the home is home acquisition debt, deductible for itemizers within the overall limit. But from tax year 2026, mortgage insurance premiums are deductible again too, subject to an income phase-out, so PMI no longer sits at a tax disadvantage.
• The second lien works on other deals too. The same purchase-money second can bridge the equity gap on an assumable mortgage, where the first lien is the seller’s old low-rate loan. The rate on the second makes or breaks either structure.

One more use worth knowing: the split can keep the first lien under the 2026 baseline conforming loan limit of $832,750 that FHFA set for most counties. On a $1,000,000 home with 10% down, an 80-10-10 puts $800,000 on a conforming first lien instead of a $900,000 jumbo. Our guide to jumbo loans and the county limits shows where that line sits in your state.

6. How to Set Up a Piggyback Loan: The Step-by-Step Process

Quick Answer: To set up a piggyback loan, get pre-approved for both liens with a lender that arranges the second in-house, ask for the same loan as a single 90% loan with PMI, compare the two Loan Estimates, lock both rates, and close both liens on the same day. Start with a real pre-approval, not a pre-qualification, because the second lender underwrites you too.

Here is the sequence that keeps the two loans from tripping over each other:

1. Confirm the 10% and your reserves. Second-lien lenders usually want the down payment from your own funds plus two or more months of both payments in reserve. Gift funds may be fine on the first lien but not the second; ask first.
2. Pick a first lender that places the second. Many banks and credit unions write the second lien themselves or through a partner. One application, one credit pull, one closing table.
3. Get both paths quoted on the same day. Ask for a Loan Estimate for the 80-10-10 and another for a single 90% loan with PMI. Compare monthly cost, closing costs, and PMI cancellation terms, then run the Section 4 test on the real numbers.
4. Lock both rates together. A mortgage rate lock on the first does not cover the second. Lock a fixed-rate second; for a HELOC, get the margin over prime in writing.
5. Close both liens on the same day. The second lien records right behind the first. Check both Closing Disclosures and confirm the first lender has the second lien on file, as Fannie Mae requires.
6. Plan the second lien’s exit. Set a target year to pay it off or refinance it into the first. That decision, more than anything at closing, decides whether the split beats PMI over the long run.

7. The Bottom Line

Quick Answer: A piggyback loan is worth it when your PMI quote is 0.5% or higher, the second lien is fixed and priced within about four points of the first, and you expect to sell, refinance, or pay off the second within seven years. On the typical U.S. home that is $49 a month and about $4,850 over five years. Skip it when your PMI quote is under 0.4%, the only second available is a HELOC, or the extra closing costs eat the first two years of savings.

Our pick for 2026 buyers with 10% down: get both quotes, apply the nine-times rule from Section 4, and take the 80-10-10 only with a fixed-rate second and a written exit plan. Buyers in California and New York have the most to gain, because PMI on a large loan is expensive and the conforming limit is in play. Buyers with excellent credit in lower-cost states often do as well with one loan and a plan to cancel PMI at year five.

That is how DollarVisor approaches every home-loan decision: the rules quoted from the agency that wrote them, the math shown line by line, state by state, with no lender paying for placement. The rest of the mortgage path, from pre-approval to payoff, lives in our loans hub.

8. Frequently Asked Questions

1. What is a piggyback loan?

A piggyback loan is a pair of mortgages taken out at the same time to buy a home. The first mortgage covers 80% of the price, a second mortgage covers 10% (or 15% in an 80-15-5), and the buyer pays the rest as a down payment. Because the first lien is at 80% loan-to-value, the lender does not require private mortgage insurance.

2. Is a piggyback loan cheaper than PMI?

Often, but not always. On the typical U.S. home with 10% down, an 80-10-10 with a 9% second lien costs about $49 a month less than a 90% loan with PMI at 0.51%. The piggyback loan loses when PMI is cheap (under about 0.4%) or the second lien is expensive (more than about nine times the PMI rate above the first-lien rate). Compare real quotes for both.

3. What credit score do you need for a piggyback loan?

Lenders set their own floors, and the second lien is usually stricter than the first. Most want a solid credit history, two or more months of both payments in reserve, and a debt-to-income ratio that fits both loans. Because the second lender holds the riskier position, buyers with thin credit may be quoted a rate high enough that PMI is the better deal.

4. Can you refinance with a piggyback loan?

Yes, but the second lender must agree to stay in second place by signing a subordination agreement, or the second lien must be paid off. Some lenders charge for subordination and some refuse. Many borrowers refinance both liens into one new loan once the combined balance is at or below 80% of the home’s current value.

5. Does a piggyback loan help avoid a jumbo loan?

It can. The 2026 baseline conforming loan limit is $832,750 in most counties. On a $1,000,000 home with 10% down, an 80-10-10 keeps the first lien at $800,000, under the limit, instead of a $900,000 jumbo loan. In high-cost counties the limit is higher, so check the county figure before you assume the split is needed.