80/10/10 Piggyback Loan vs PMI: A Worked Comparison on a $400,000 Home

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By De Van Do -- Published October 25, 2026 -- 9 min read

What an 80/10/10 Loan Is

Conventional lenders generally want mortgage insurance when you put down less than 20 percent. The CFPB explains that private mortgage insurance, or PMI, protects the lender and not the borrower, and that it is usually added to the monthly payment. A piggyback loan is one way people try to avoid it.

The CFPB describes a piggyback as a home equity loan or line of credit taken out at the same time as the main mortgage. In the common 80/10/10 version, you put 10 percent down, the first mortgage covers 80 percent of the price, and a second mortgage covers the remaining 10 percent. You still borrow 90 percent of the price in total, but the main loan is only 80 percent, so PMI is not required on it. The second loan typically carries a higher interest rate, and it is often adjustable.

This article compares the two ways of buying with 10 percent down, using one home price and clearly labeled assumptions. The CFPB's advice is the same approach: compare the total cost of both loans against a single loan with mortgage insurance, and ask for a quote on that single loan.

The Setup and the Assumptions

The home costs $400,000 and the buyer puts down $40,000, which is 10 percent. Two structures are compared.

Structure A, the piggyback. A first mortgage of $320,000 at 7.00% for 30 years, plus a second mortgage of $40,000. The second is assumed to be a fixed-rate loan at 9.00% repaid over 20 years. That rate is an illustration, because no primary source gave typical second-mortgage pricing.

Structure B, the single loan with PMI. One mortgage of $360,000 at 7.00% for 30 years, plus PMI. The PMI charge is assumed to be 0.50 percent of the loan per year, which is $150 a month. This is also an illustration, because the CFPB does not publish PMI price ranges and rate cards from insurers were not part of this research.

Both structures use the same first-mortgage rate to keep the comparison simple. In real life the rates would differ, so the numbers show how the structures behave and not what you will be offered. Closing costs, appraisal fees, and any fees on the second loan are not included. Taxes and homeowners insurance are the same either way and are left out.

Monthly Payments

Structure A, the piggyback: the first mortgage payment is $2,128.97 and the second mortgage payment is $359.90, for a total of $2,488.86 a month in principal and interest.

Structure B, the single loan with PMI: the $360,000 mortgage payment is $2,395.09, and PMI adds $150, for a total of $2,545.09 a month.

Under these assumptions the piggyback is about $56 a month cheaper. That gap is small, and it is easy to erase. If the second mortgage rate were 11% instead of 9%, its payment would be $412.88 and the piggyback total would be $2,541.84, almost identical to the PMI total. If the PMI charge were 0.30 percent a year, which is $90 a month, the PMI structure would be about $4 a month cheaper than the piggyback. The monthly difference depends on prices you cannot know without quotes.

If the second loan is a line of credit that allows interest-only payments during its draw period, the payment on $40,000 at 9% could be as low as $300 a month. The CFPB warns that with a variable rate the payment can change even if you borrow nothing more, and that a balloon payment may come due at the end of the draw period.

Ten-Year Cost

Monthly payments hide an important difference: what happens to the balance. In the piggyback, the second loan pays down quickly because it is repaid over 20 years. In the PMI structure, the PMI payment is money that buys no equity.

Over the first 120 payments, total interest on the piggyback structure is about $241,700. In the PMI structure, interest on the $360,000 loan is about $236,300, plus the PMI premiums. PMI does not last forever, as the next section explains, and in this example it ends after 115 payments, so the premiums total $17,250. Interest plus PMI comes to about $253,600.

On that measure the piggyback costs about $11,900 less over ten years under the base assumptions. After 120 payments the piggyback borrower also owes about $303,000 in total, compared with about $308,900 in the PMI structure, which is a further advantage of about $5,900 in remaining balance.

Now the sensitivity. If the second mortgage rate is 11%, piggyback interest over ten years rises to about $249,600, and the advantage shrinks to about $4,000. If PMI is 1.00 percent a year, PMI structure costs rise to about $270,800 and the piggyback advantage grows to about $29,000. If PMI is 0.30 percent a year and the second is at 9%, the piggyback still comes out about $5,000 ahead on interest plus PMI over ten years, though its monthly payment is slightly higher because the second loan repays principal faster. In every run above the piggyback stays ahead on interest plus PMI, but it would lose with a second loan that costs enough more than assumed here. The only way to know is to get both quotes on the same day.

How PMI Ends

PMI is not permanent on conventional loans, and the rules matter for this comparison. The CFPB explains the federal rules for most single-family primary home loans closed on or after July 29, 1999. FHA and VA loans, and loans where the lender pays for the insurance, follow different rules.

You may ask in writing to cancel PMI once the balance is scheduled to reach 80 percent of the home's original value, or earlier if extra payments get you there. The servicer can require a good payment history, proof that the value has not fallen below the original value, and certification that there are no junior liens such as a second mortgage. PMI must end automatically when the balance is scheduled to reach 78 percent of original value, if you are current. And it must end after the midpoint of the loan term, which is after 15 years on a 30-year loan, if you are current.

On the $360,000 loan, 80 percent of the original value is $320,000 and 78 percent is $312,000. By the payment schedule, the balance reaches $320,000 at payment 101 and $312,000 at payment 115. That is where the $17,250 figure above comes from: 115 payments at $150. If you request cancellation at payment 101, you would pay $15,150.

Notice the connection to the piggyback. The certification that no second mortgage exists is a condition of requesting PMI cancellation. A piggyback borrower has no PMI to cancel, which is the point of the structure.

The Risks of the Second Loan

The extra cost is not the only difference. A second mortgage adds risk in ways that PMI does not.

The rate can change. The CFPB notes that second loans often carry higher, adjustable rates, and that home equity lines usually have a variable rate built from an index plus a margin. Some lines offer a low introductory rate, often for around six months.

The line can be frozen. The CFPB warns that a lender can freeze or reduce a credit line if home value drops or your finances worsen.

Refinancing gets harder. The CFPB notes that refinancing the first mortgage generally requires the second lender to agree to stay in second position, unless the refinance pays off the second loan as well. Falling home values or missed payments can make refinancing, modification, or selling harder.

A balloon can come due. If the second loan has a draw period followed by a short repayment period, you may need to refinance or find cash when it ends.

The failure case is also worse. The CFPB states that if you fall behind or cannot repay a home equity line on schedule, you could lose your home.

The PMI structure has one fixed loan and one known cost. It costs more in some scenarios, but it has fewer moving parts.

Can You Even Get One?

Availability is the part of this strategy that is hardest to confirm. The CFPB, in its review dated September 2024, described piggyback loans as common in the mid-2000s housing boom, rare today, and possibly returning. That is the agency's description and not a market survey. This article could not confirm which lenders offer them now, what credit scores they require, or what minimum down payment applies.

On the rules side, Fannie Mae's Selling Guide allows a first mortgage on a property with subordinate financing, subject to conditions. The second lien must be backed by a note, be recorded and clearly subordinate to Fannie Mae's loan, be disclosed to the appraiser and mortgage insurer, and must not allow negative amortization. All subordinate liens count toward the combined loan-to-value ratio, which for an 80/10/10 loan is 90 percent. The Guide points to its Eligibility Matrix for the numeric ceilings, and this article does not state those limits because how they apply to a given loan could not be confirmed. Ask your lender directly.

Tax treatment of PMI and of second-mortgage interest is also not covered here. The IRS had only a draft 2026 publication on the mortgage insurance premium deduction when checked, so treat any claim about its return as unconfirmed and ask a tax professional.

When Each Choice Is the Wrong Move

The piggyback is the wrong move when the second loan has a variable rate and your budget could not absorb a higher payment, when you expect to refinance soon and do not want a second lender involved, or when prices in your area could fall and leave you with little equity. It is also wrong when the quoted second-loan rate is high enough to erase the benefit, as the 11 percent example shows.

The single loan with PMI is the wrong move when the PMI quote is high, because a high charge for a long time can cost more than a second loan.

A third path exists: wait and save to reach 20 percent down, which removes the question. That choice has its own cost, because you stay out of the market while you save.

How to Compare Real Quotes

Ask for two Loan Estimates on the same day: the 80/10/10 structure with both loans, and a single 90 percent loan with PMI. Put the first-mortgage payment, the second-mortgage payment, and the PMI charge side by side. Use the mortgage calculator to price the first loan and check the lender's figures, then compare the interest plus PMI over the number of years you expect to keep the loan, not over 30 years. Add the closing costs for each structure. Finally, ask what rate adjustments, caps, and draw periods apply to the second loan, because those terms decide the risk.

Open the Mortgage Calculator

Price the first mortgage on its own, then compare it to your quotes.

Related guides

PMI Math: The Exact Month It Falls Off (I Ran the Schedule)
On a $450,000 loan at 7%, the amortization schedule crosses 80% LTV at month 101 but PMI does not cancel automatically until month 115. That 14 month gap is worth $3,675, and all it costs you is a letter.

Down Payment Strategies: How Much to Put Down and Where to Get It
A complete guide to down payment strategies -- 3% vs 5% vs 20%, how to save faster, gift funds, down payment assistance programs, and the PMI math.

Home Equity Loan vs HELOC: Which Is Right for You?
A complete comparison of home equity loans and HELOCs -- how each works, interest rate differences, tax implications, and which is better for different situations.

Sources

Facts, limits and rules on this page were checked against these primary sources on October 25, 2026.

About the author

De Van Do has a background in technology and built VisualMortgage out of curiosity about making mortgage math transparent. De Van Do is not a licensed loan officer or mortgage broker -- for advice specific to your situation, consult a licensed mortgage professional. Read more about VisualMortgage.

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