Piggyback Loan

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When buying a home, the mortgagee will often require buyers to contribute 20 percent of the cost of the home themselves, and will lend the buyers the remaining 80 percent. For example, the home costs $100,000; the mortgagee will lend the buyer $80,000 and the buyer must provide $20,000 as a down payment. However, if the buyer cannot afford the full $20,000, she has two possible options. One is to buy private mortgage insurance that protects the lender in case the buyer defaults. Another is to obtain another loan - which can be from a different lender - to pay for all or part of the down payment. This additional loan is known as a piggyback loan. See also Second Mortgage.