Piggyback Loan Calculator
Determine the potential benefits of a piggyback loan for your mortgage. Input your primary loan details, such as loan amount and interest rate, along with the piggyback loan information, including loan amount and interest rate.
What is Piggyback Loan Calculator
A Piggyback Loan Calculator is a financial tool used to evaluate the potential benefits and costs of utilizing a piggyback loan as part of a home financing strategy. A piggyback loan, also known as an 80-10-10 loan, involves combining two mortgages to finance a home purchase.
Here's how a Piggyback Loan Calculator typically works:
Home Purchase Price: Enter the total cost of the home you wish to purchase.
Down Payment: Specify the down payment amount you plan to make. This should be a percentage of the home purchase price.
Primary Mortgage Details: Enter information about the primary mortgage, including the loan amount, interest rate, and loan term.
Second Mortgage Details: Enter information about the second mortgage or piggyback loan, such as the loan amount, interest rate, and loan term.
Calculation Results: The calculator will provide various results, including:
Monthly Payments: It will display the monthly payments for both the primary mortgage and the second mortgage separately.
Total Cost: The calculator will show the total cost of both mortgages over the loan terms, considering interest payments and any associated fees.
Comparison: The calculator may also offer a comparison between using a piggyback loan and opting for a single mortgage with a larger down payment. This can help you assess which option is more financially advantageous.
By using a Piggyback Loan Calculator, you can evaluate whether a piggyback loan arrangement is a suitable financing option for your circumstances. It allows you to analyze the potential savings on mortgage insurance premiums or interest rates compared to other loan structures like a single mortgage with a higher down payment.
Remember that the results provided by a Piggyback Loan Calculator are estimates and should not replace professional advice. It's advisable to consult with a mortgage lender or financial advisor who can provide personalized guidance based on your specific financial situation and loan options available to you.
Understanding Piggyback Loans
A piggyback loan, which is also referred to as a blended rate mortgage, is a combination of two mortgages. It essentially involves taking out a second mortgage to amass a down payment over 20% of the value of the property as a means of removing the need to pay a private mortgage insurance premium. It is not possible to use a piggyback loan to cover a down payment against a government-backed home loan; for example, USDA, FHA, and VA. The combined cost of the two mortgages can be less than the cost associated with repaying a single mortgage in addition to a private mortgage insurance premium.
The most common forms of piggyback loans are 80-5-15, 80-10-10 or 80-15-5. In this case, the first number represents the percentage of the first mortgage, the second is the second loan, and the third is the percentage of the down payment, which can range from 5-15%.
Piggyback Loan Example
Let's look at an example of how a piggyback loan may operate. Let’s say you are buying a home that costs $300,000 and you have a down payment available of 10%. You have secured a 30-year fixed-rate mortgage at 5%.
The options you could have available are summarized below.
Option #1: Borrow 90% of the value of the home ($270,000) and pay PMI.
- Mortgage Payment: $1,449.42
- Monthly PMI Payment (0.5%): $112.50
- Total Monthly Payment: $1,561.92
Option #2: Borrow 80% of the value of the home ($240,000) and take out a piggyback loan for the remaining $30,000.
- Mortgage Payment: $1,288.37
- Piggyback Loan Payment (8%): $220.13
- Total Monthly Payment: $1,508.50
As the calculations above indicate, Option #2 will result in a monthly payment that is $54 lower than Option #1. However, it is important to bear in mind the fact that the second loan may incur origination fees that increase the cost of this option.