Piggyback Mortgage Definition

A piggyback mortgage is a second mortgage that is taken at the same time as a property’s first mortgage. Piggyback mortgages are usually used to reduce the first mortgage’s loan-to-value ratio so that it does not exceed 80% of the property’s value (which would in turn require private mortgage insurance). For example, a person purchasing a $500,000 home may have only $50,000 to provide as a down payment; the person would take out a first mortgage of $400,000 (with a resulting loan-to-value ratio of 80%) and supply the remaining $50,000 by taking out a piggyback mortgage. Note that piggyback mortgages usually have a higher interest rate than first mortgages.