Combo or Piggyback Loan

Unlock Pathways to Homeownership with Creative Financing

Quick Summary

Combo or Piggyback Loans offer an innovative approach to homeownership by combining two mortgages to cover a home purchase. This strategy is ideal for borrowers seeking to avoid private mortgage insurance (PMI) and manage down payment limitations. Assessing the long-term implications and payment management is essential before considering this financing option.

What is a Combo or Piggyback Loan?

A Combo or Piggyback Loan is a creative financing strategy that involves taking out two separate mortgages to fund a home purchase. The first mortgage covers the majority of the home’s purchase price, and the second mortgage, often referred to as a “piggyback” or “second lien,” covers a portion of the remaining cost. This strategy is commonly used to avoid private mortgage insurance (PMI) when a borrower cannot provide a 20% down payment.

Is a Combo or Piggyback Loan right for me?

Evaluating whether a Combo or Piggyback Loan is suitable for you involves considering the following factors:

  1. Down Payment Limitations: If you’re unable to make a 20% down payment, a Combo/Piggyback Loan allows you to avoid PMI, which can save you money over time.
  2. Equity Considerations: Since you’ll have two mortgages, it’s essential to assess how quickly you’ll build equity in your home to manage future refinancing or selling.
  3. Interest Rate Dynamics: Each mortgage can have a different interest rate. It’s important to understand how your overall interest costs will be affected by these rates.
  4. Payment Management: Managing two mortgage payments requires financial discipline. Assess your ability to handle these payments in the long term.

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