Looking for a way to break out of the rental stable but can't save enough for a big down payment? Let me tell you how we do it, partner! Big down payments aren't always necessary. Rather than going with a single, 100% LTV mortgage, which most often will require PMI, savvy mortgage brokers like Lightning Mortgage will recommend a piggyback mortgage.

Piggyback loans are constructed by dividing the loan amount into two mortgages. The first loan, the bigger mortgage, is usually no more than 80% of the home's value (or purchase price). Since it is no more than 80%, PMI is avoided.

Since these loans represent a greater risk to the lender, a borrower is typically required to have better credit scores than if a down payment was made. The second loan will always have a higher interest rate than the first loan. Use this Blended Interest Rate Calculator to see the combined interest rate really isn't as bad as you may think.

The first mortgage may be a 15- or 30-year fixed rate, an ARM, or a 30/15 balloon. The second mortgage is typically a 15 year fixed rate, 30/15 balloon or a home equity line of credit (HELOC) product. Both first and second loans must be the same
income documentation type.

• A piggyback mortgage may be just the ticket if you want to avoid paying PMI.
• Loan size can be jumbo
• Maximum combined financing to 100% for purchases
• 2nd homes with only 5% down (95% LTV refinance)
• Investment properties with only 10% down (95% LTV refinance)

Alternatively, you may be interested in paying your loan off early, but as painlessly as possible. If you want to ease into homeownership check into our temporary buydown or ARM options. 

There's no magic to figuring out your combined interest rate when you have a piggyback mortgage as long as the term of both loans are the same (e.g. they are both 30 year mortgages). Let's say you have an 80% first loan at 7% and a second mortgage at 9.5% for 20%. Simply multiply 80 * .07 and 20 * .095, then add their products together. That's 5.6 + 1.9 or a combined interest rate of 7.5%.

Simple, huh? Well, for speed and convenience, you can also use this calculator:

• Find Out About the 8 Deadly Home Buying Mistakes
• Explore other Loan Types
• Learn about Credit Scores
• Determine if you want to be pre-qualified or pre-approved
• Learn about the Tax Advantages of Home Ownership
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