Piggyback Loan Calculator
You can use this piggyback loan calculator to make a decision as to whether you should opt for a piggyback loan as opposed to taking out a loan to cover private mortgage insurance. This piggyback loan calculator enables you to quickly and easily compare the various mortgage offerings that are available to choose the option that is best suitable for your unique financial situation.
Understanding Piggyback Loans
A piggyback loan, which is also referred to as a blended rate mortgage, is a combination of two mortgages. It essentially involves taking out a second mortgage to amass a down payment over 20% of the value of the property as a means of removing the need to pay a private mortgage insurance premium. It is not possible to use a piggyback loan to cover a down payment against a government-backed home loan; for example, USDA, FHA, and VA. The combined cost of the two mortgages can be less than the cost associated with repaying a single mortgage in addition to a private mortgage insurance premium.
The most common forms of piggyback loans are 80-5-15, 80-10-10 or 80-15-5. In this case, the first number represents the percentage of the first mortgage, the second is the second loan, and the third is the percentage of the down payment, which can range from 5-15%.
Piggyback Loan Example
Let's look at an example of how a piggyback loan may operate. Let’s say you are buying a home that costs $300,000 and you have a down payment available of 10%. You have secured a 30-year fixed-rate mortgage at 5%.
The options you could have available are summarized below.
Option #1: Borrow 90% of the value of the home ($270,000) and pay PMI.
- Mortgage Payment: $1,449.42
- Monthly PMI Payment (0.5%): $112.50
- Total Monthly Payment: $1,561.92
Option #2: Borrow 80% of the value of the home ($240,000) and take out a piggyback loan for the remaining $30,000.
- Mortgage Payment: $1,288.37
- Piggyback Loan Payment (8%): $220.13
- Total Monthly Payment: $1,508.50
As the calculations above indicate, Option #2 will result in a monthly payment that is $54 lower than Option #1. However, it is important to bear in mind the fact that the second loan may incur origination fees that increase the cost of this option.
You may also be interested in our free PITI Mortgage Payment Calculator or GPM Calculator