Piggyback Loan
Barron's Finance & Investment Dictionary:
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Piggyback Loan
second mortgage loans “piggybacked” onto first mortgages after home improvements have added value or, in a rapidly inflating housing market, to compensate for a small or nonexistent down payment and save the higher expense of private mortgage insurance (PMI). The first and second loans, which close simultaneously, typically represent 80% and 10% of home value, respectively, with the remaining 10% a down payment, hence the term, “80–10– 10s.” Some lenders, however, will allow the piggyback loan to represent 20% and some will structure it as a homeowner’s equity account.
| Picture, Pickup Bond | |
| Piggyback Registration, Piggybacking |
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Piggyback Loan
Barron's Real Estate Dictionary:
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Piggyback Loan
1. a combination of the construction loan with the permanent loan commitment.
Example: The permanent lender would issue a commitment at an 8% rate, effective upon completion of construction. As assurance that the loan will be borrowed even if rates are lower later, the commitment is piggybacked to the construction loan, and must be drawn down upon retiring the construction loan.
2. one mortgage held by more than one lender, with one lender holding the rights of the others in subordination.
Example: Aloan is made for 90% of the home price; 80% of the price is supplied by a savings and loan association, 10% by an individual, who then has a piggyback loan. The piggyback agreement allows the S&L to have priority in foreclosure. This type of arrangement can be used to avoid private mortgage insurance .
See mortgage.
| Physical Life, Physical Depreciation or Deterioration | |
| Piggybacking (credit score), Pipeline |
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Barron's Finance & Investment Dictionary
Dictionary of Finance and Investment Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
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