Write an article based on this "Research the "piggyback" option. Calculate the value. Understand the drawbacks."
A "piggyback loan" will allow someone with a low down payment, or even no down payment, to purchase a home without PMI. This is actually a name for getting two separate loans. The first loan will be for of 80% of the property's value, so there will be no PMI requirement. Then the borrower will get a second loan that "piggybacks" on the first one, to cover the rest of the money that is needed. Following the downturn of the housing market, many banks have limited the piggyback option to 10% of the value, requiring the borrower to make at least a 10% down payment. This is often called an "80/10/10" loan, referring to the 80% first loan, 10% piggyback loan, and 10% down payment. Suppose a buyer wants to buy a property for $200,000. With an 80/10/10 piggyback loan, he would borrow $160,000 on a first mortgage (80%), $20,000 on a second, piggyback mortgage (10%), and make a down payment of $20,000 (10%). Imagine another buyer wants to buy a property for $450,000 using an 80/10/10 piggyback loan. His first mortgage would be $360,000 (80%); the second, piggyback mortgage would be $45,000 (10%); and the down payment would be $45,000 (10%). A piggyback loan is not automatically going to be cheaper than a traditional loan that includes PMI payments. You can use an online loan calculator to help you figure out which is preferable. One example of such a calculator is http://www.goodmortgage.com/Calculators/PMI_Or_Piggyback.html. The second loan is typically for a much shorter term than the first, often requiring full payoff in about ten years. While the piggyback loan lets you cut out PMI payments, you must realize that you will be making monthly payments on two loans at once. A buyer using this option will need to be sure that he can afford the monthly payments on both loans together.