80-10-10 Piggyback Loans: How to Eliminate PMI, Avoid Jumbo Pricing, and Qualify the Second Lien

An 80-10-10 piggyback loan is a purchase structure where the buyer takes a first mortgage at 80% LTV, a second mortgage at 10%, and puts 10% down. The result: no PMI on the first, no jumbo pricing if the first loan stays under the conforming limit, and a lower blended payment than a 90% LTV first mortgage with PMI in many rate environments.

When an 80-10-10 Makes Sense

• ✦The purchase price is above the conforming loan limit and a jumbo first mortgage would carry a rate premium above 0.375%
• ✦PMI on a 90% LTV first mortgage costs more per month than the interest cost of the 10% second lien
• ✦The borrower has exactly 10% down and does not want to wait to save to 20%
• ✦The borrower's credit profile qualifies for better pricing on the 80% first than on a 90% LTV transaction

Second Lien Options: HELOC vs. Closed-End Second

The 10% second can be structured as a HELOC or a closed-end second mortgage. A HELOC has a variable rate tied to prime; it reduces the initial payment but introduces rate risk. A closed-end second has a fixed rate and known payoff, making payment planning easier. For DTI purposes, Fannie Mae requires the HELOC payment to be calculated at 1% of the credit limit even if no draws are outstanding; a closed-end second uses the actual scheduled payment. Underwriters often prefer the closed-end structure for clean qualifying.

Finding a Second Lien Lender

The simultaneous second mortgage lender must be identified before the loan application is submitted. Not all first mortgage lenders allow a simultaneous second, and not all second lien lenders will work with all first lien lenders. The second lien lender's underwriting must be completed and approval obtained before or concurrent with first lien approval. Confirm that both lenders can close simultaneously before structuring the deal. Community banks, credit unions, and some regional portfolio lenders are the most common second lien sources.