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September 19, 2026
A piggyback loan is a financing strategy where a homebuyer takes out two separate mortgages simultaneously — one large primary loan and one smaller second loan — to cover the purchase of a single home, often eliminating the need for private mortgage insurance (PMI). The two loans work together, or piggyback on each other, to bridge the gap between your down payment and the full purchase price.
The most common structure is the 80-10-10: the first mortgage covers 80% of the home’s purchase price, the second mortgage covers 10%, and the buyer brings 10% as a down payment. Other configurations like 80-15-5 exist for buyers with less cash on hand.
Pike Creek Mortgages in Newark, DE works with homebuyers across Delaware who use piggyback structures to get into a home sooner without the ongoing cost of PMI dragging down their monthly budget.
At closing, you sign two separate loan agreements — typically a conventional first mortgage and a home equity loan or home equity line of credit (HELOC) as the second. Both loans fund simultaneously, meaning the seller sees a clean, fully financed transaction.
Here is how the mechanics break down in practice:
Because the first loan stays at or below 80% loan-to-value (LTV), conventional lenders do not require PMI — which is the core financial goal of the strategy.
Private mortgage insurance typically costs between 0.5% and 1.5% of your original loan amount per year, added to your monthly payment until you reach 20% equity in the home. On a $350,000 home with a 5% down payment, that can mean an extra $140 to $420 per month in PMI premiums alone.
Whether a piggyback loan saves you money depends on the interest rate you receive on the second mortgage versus what you would pay in PMI over the same period. In many cases — particularly when PMI rates are high or the second loan can be paid off quickly — the piggyback structure wins. However, second mortgages carry a higher rate, so the math is not always straightforward. An NMLS Licensed Lender at Pike Creek Mortgages can run a side-by-side comparison for your specific purchase price and credit profile before you commit.
Second mortgage rates on piggyback loans are set independently from the primary loan and are almost always higher — often by 1 to 3 percentage points above current 30-year fixed rates. The exact rate depends on your credit score, the lender’s current pricing, the loan-to-value ratio of the second mortgage, and whether you choose a fixed home equity loan or a variable-rate HELOC.
Because rates fluctuate and Delaware borrowers may qualify for different programs depending on purchase location and income, it is worth getting a written rate comparison rather than relying on generic national averages. As our guide to refinancing strategies covers, even a small rate difference on a second mortgage can shift the break-even point significantly over a five-year horizon.
Piggyback loan eligibility generally requires stronger credit than a standard single-mortgage purchase, because you are underwriting two loans at once. Most lenders look for a minimum credit score of 680 on the primary loan, though 700 or above improves your odds of competitive pricing on both the first and second mortgage.
Additional qualifying factors typically include:
Delaware’s real estate market, particularly in the Newark and Pike Creek corridor, features median home prices that often push buyers into PMI territory when putting down less than 20%. That makes the piggyback structure a genuinely practical option for qualified buyers in this market, not just a theoretical one.
The most important cost buyers overlook is the closing cost of two loans instead of one. You will pay origination fees, appraisal costs, and title-related charges on both mortgages. Combined, this can add $1,500 to $4,000 or more in additional closing costs compared to a single-loan transaction, depending on the second loan amount.
Other risks to account for before committing:
See our full guide to home equity loans and HELOCs for a deeper look at how second lien structures behave over time, especially if you are considering a variable-rate second.
Delaware homebuyers who cannot put down 20% have several paths available — and the piggyback loan is just one of them. FHA loans allow down payments as low as 3.5% but carry mortgage insurance premiums (MIP) for the life of the loan in most cases. Conventional loans with PMI may be simpler to qualify for and eliminate PMI automatically at 20% equity. Delaware State Housing Authority (DSHA) programs offer down payment assistance that can reduce or eliminate the gap altogether for income-qualified buyers.
The piggyback structure tends to make the most sense when you have 10% to put down, have strong credit, and want to avoid any form of mortgage insurance while keeping the first loan under conforming limits. It is not the right fit for every buyer, which is why Pike Creek Mortgages, serving Newark, DE and the surrounding Delaware communities, walks clients through a direct comparison of all available options before recommending a structure.
Waiting to reach a full 20% down payment is financially sound advice in a stable or declining market, but in a competitive market where home prices are rising, every month of waiting can cost more than the PMI you were trying to avoid. If Newark-area home values appreciate 5-7% annually, a $350,000 home you delay purchasing by 18 months may cost you $26,000 to $37,000 more — far exceeding the PMI you would have paid in that period.
A piggyback loan can bridge that gap without forcing you to pay PMI, provided you qualify and the second mortgage rate is manageable. That said, timing and local market conditions matter. As covered in our homebuying timeline guide, the decision to buy now versus wait is rarely just a mortgage math question — it also involves job stability, local inventory, and your long-term plans for the property.
This guide was prepared by the NMLS Licensed Lending team at Pike Creek Mortgages, serving Newark, DE and homebuyers throughout Delaware.
A piggyback loan combines two mortgages taken out simultaneously on the same home — typically an 80% first mortgage and a 10% second mortgage — so the buyer can put down only 10% while keeping the first loan below 80% LTV and avoiding PMI entirely.
It often does, but not always. PMI costs 0.5% to 1.5% of the loan per year, while the second mortgage carries a higher interest rate. Which option is cheaper depends on your specific rate offers, how quickly you can pay off the second loan, and how long you plan to stay in the home.
Yes, but it requires an extra step — the second mortgage lender must agree to stay in a subordinate lien position when you refinance the first. This is called a subordination agreement, and most lenders will grant it, though it adds time and paperwork to the refinance process.
Most lenders require a minimum credit score of 680 to qualify for a piggyback structure, with 700 or higher typically needed to access competitive rates on both the first and second mortgage.
An 80-10-10 is the most common type of piggyback loan, where the first mortgage covers 80% of the purchase price, the second covers 10%, and the buyer provides a 10% down payment. Other structures like 80-15-5 also exist and follow the same piggyback concept.