Short answer: a piggyback second mortgage is a home equity loan or line of credit made at the same time as your main mortgage, so the main mortgage covers a smaller share of the price and you may avoid private mortgage insurance (PMI). You still borrow the same total, the second loan has its own rate and payment, and the lender must count that payment when it checks your ability to repay. The CFPB suggests asking for a quote for the same loan as a single loan with mortgage insurance and comparing total costs. This page covers federal law only; other rules may apply where you live. It is general information, not legal or financial advice.
How the structure works
The CFPB describes a piggyback second mortgage as a home equity loan or HELOC made at the same time as your main mortgage, so that a buyer with a small down payment can qualify for the main mortgage without paying for PMI. In its example, a buyer with a 10 percent down payment takes an 80 percent main mortgage and a 10 percent piggyback second mortgage, still borrowing 90 percent of the value. It says the second loan carries a higher interest rate, which may be adjustable, and that the structure is rare today (CFPB: piggyback second mortgage, last reviewed September 11, 2024, read October 30, 2026; this page may be out of date). On PMI itself, the CFPB says it protects the lender, not you (CFPB: what is PMI, last reviewed August 28, 2023; this page may be out of date).
Example: one loan with PMI vs two loans
This example is only for the math, with example rates, premium and price, not offers from any lender. Both loans are fixed-rate, 30-year loans; payments are principal and interest, rounded to the dollar, before taxes and homeowners insurance.
| Item | One loan with PMI | Piggyback |
|---|---|---|
| Price and down payment (10%) | $400,000, $40,000 | $400,000, $40,000 |
| First mortgage | $360,000 at 6.0% | $320,000 (80%) at 6.0% |
| Second loan | None | $40,000 at 8.0% |
| First mortgage payment | $2,158 | $1,919 |
| Second loan payment | None | $294 |
| Monthly PMI premium (example) | $150 | None |
| Total monthly payment | $2,158 + $150 = $2,308 | $1,919 + $294 = $2,213 |
A monthly figure alone does not settle the comparison. PMI on a fixed-rate loan ends under the rules below, while the second loan payment lasts until that loan is paid off. A variable rate on the second loan would change its payment. Closing costs on two loans differ from costs on one. Ask for both structures in writing and compare total costs over the time you expect to keep the loan.
Why the PMI rules do not end a second loan
Under the Homeowners Protection Act, you may ask to cancel PMI on a fixed-rate loan when the principal balance of that mortgage is first scheduled to reach, or actually reaches, 80 percent of the original value, and PMI ends automatically when the balance is first scheduled to reach 78 percent if you are current (12 U.S.C. 4901(2) and (18), LII; 4902(a)-(b), LII; read October 30, 2026). Original value is the lower of the contract sales price and the appraised value at closing (4901(12)). These rules end mortgage insurance; they say nothing about paying off or ending a second loan.
A second lien also matters for a cancellation request: to cancel at your request, you must meet the holder’s requirements for evidence that the property value has not declined below the original value and for certification that your equity is unencumbered by a subordinate lien (4902(a)(4)). Automatic termination at 78 percent does not list that condition (4902(b)).
| Example, $400,000 original value | Balance |
|---|---|
| 80 percent: request cancellation | $320,000 |
| 78 percent: automatic termination | $312,000 |
For the full steps, see how to remove private mortgage insurance and the CFPB answer on removing PMI.
How the second loan counts in the repayment check
For a covered home loan, the lender must consider your monthly payment on any simultaneous loan that it knows or has reason to know will be made (12 CFR 1026.43(c)(2)(iv), eCFR, text up to date as of October 28, 2026, read October 30, 2026). A simultaneous loan is another covered loan or a HELOC secured by the same home and made to you at or before closing (1026.43(b)(12)). For a HELOC, the lender uses the periodic payment under the plan and the amount drawn at or before closing (1026.43(c)(6)(ii)). The official comments use a piggyback second loan for part of the down payment as their example, and say that when a HELOC is the verified source of the down payment, the lender must assume at least the down payment amount is drawn (Supplement I, comments 43(c)(2)(iv)-2 and 43(c)(6)-3, eCFR). See the mortgage ability-to-repay rule.
Refinancing later
The CFPB says it can be harder to refinance when you also have a second mortgage, because the second mortgage lender has to agree to the refinance unless you pay off the second loan with the new loan (CFPB). It also says a second mortgage is paid after the first if the home is sold to pay the debts, and that you could lose your home if you cannot repay a home equity loan or line (CFPB: second mortgage, last reviewed September 11, 2024; this page may be out of date). For how a line of credit compares with other borrowing, see HELOC vs personal loan.
Questions to ask the lender
- Can you quote this purchase as one loan with mortgage insurance and as a piggyback, with total costs for each?
- Is the second loan a fixed-rate loan or a line of credit, and can its rate or payment rise?
- When does the second loan’s draw period end, and is there a balloon payment?
- If I refinance the first mortgage, will the second lender agree to stay in second place, and what does that cost?
- What PMI premium would apply on the single loan, and when would it end under my amortization schedule?
Checklist
- Compare both structures on total cost, not only the first monthly payment.
- Check the rate type and term of the second loan.
- Check that the lender counted both payments in your repayment check.
- Note the 80 and 78 percent balances on any loan with PMI.
- Plan how you would refinance or pay off the second loan.
You can submit a complaint at consumerfinance.gov/complaint.
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Sources
- CFPB: What is a “piggyback” second mortgage? (last reviewed September 11, 2024)
- CFPB: What is private mortgage insurance? (last reviewed August 28, 2023)
- Cornell LII: 12 U.S. Code 4901, Definitions (Homeowners Protection Act of 1998)
- Cornell LII: 12 U.S. Code 4902, Termination of private mortgage insurance (Homeowners Protection Act of 1998)
- CFPB: When can I remove private mortgage insurance (PMI) from my loan? (last reviewed August 28, 2026)
- eCFR: 12 CFR 1026.43, Minimum standards for transactions secured by a dwelling (Regulation Z), current text up to date as of October 28, 2026
- eCFR: Supplement I to Part 1026, Official Interpretations (Regulation Z), current text up to date as of October 28, 2026
- CFPB: What is a second mortgage loan or “junior-lien”? (last reviewed September 11, 2024)
- CFPB: Submit a complaint
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