An 80/10/10 piggyback loan is a home financing structure that uses two mortgages plus a 10% down payment to help a buyer stay at an 80% first-loan-to-value ratio and avoid private mortgage insurance (PMI). For some Washington State home buyers, that can be worth considering when they want to buy with less than 20% down. But avoiding PMI is not automatically the lowest-cost option. The better comparison is the total cost of an 80/10/10 structure versus making a larger down payment, paying borrower-paid PMI on one conventional loan, or considering other mortgage setups.
Objective: This article explains what PMI is, how an 80/10/10 piggyback loan works, and what tradeoffs Washington home buyers should compare before choosing this strategy.
In Washington State, private mortgage insurance is typically required in situations where a conventional home loan exceeds 80% of the property value. This is often the case when a borrower makes a down payment less than 20%.
PMI is a unique kind of insurance that is paid by the homeowner. The policy protects the mortgage lender from potential losses that may result from borrower default. In this context, “default” is when a homeowner is unable to continue making payments on the loan.
Washington State private mortgage insurance is usually required when a loan accounts for more than 80% of the home’s value.
PMI can increase a borrower’s monthly housing cost, but it can also be a simpler path than using two loans. That’s why the key question is usually not just how to avoid PMI, but whether avoiding it actually lowers your total cost or better fits your financing goals.
Of course, as a home buyer, you’d obviously like to avoid this extra cost if at all possible. And it is possible. There are several ways to avoid paying private mortgage insurance in Washington State. And one of them is by using what’s known as an 80/10/10 piggyback loan.
Washington State home buyers can avoid PMI by making a down payment of 20% or more, which in turn keeps the loan-to-value ratio below 80%. But not everyone can afford to put 20% down. One alternative is an 80/10/10 piggyback structure.
With this setup, the buyer makes a 10% down payment. The remaining 90% of the purchase price is covered by two loans: a first mortgage for 80% and a second mortgage for 10%.
There are other variations of the piggyback loan strategy. The 80/10/10 version is one of the most common. This strategy allows home buyers to make a down payment less than 20%, while avoiding the extra cost associated with PMI.
That said, the arithmetic is only part of the decision. A piggyback loan means taking on a subordinate second lien, and the lender has to evaluate the full combined loan-to-value ratio when reviewing the file. The subordinate financing also has to be documented and disclosed as part of the transaction. In practical terms, that can make the approval process more involved than using a single conventional loan with PMI.
Borrowers should also compare the pricing of the two loans, not just the presence or absence of PMI. The second mortgage in a piggyback structure typically carries a higher interest rate than the first mortgage and is often adjustable. That can make the monthly payment less predictable over time if the second loan’s rate changes later.
There is also a convenience tradeoff. Instead of one mortgage payment, you may have two separate monthly obligations with different terms. You can also face closing costs on each loan, which affects your cash to close even though the down payment is lower than 20%.
Most importantly, the right comparison is not simply “PMI or no PMI.” It is the total monthly and long-term cost of a first mortgage plus second mortgage versus a single first mortgage plus borrower-paid PMI. In some cases, the piggyback option may lower the payment or help a borrower avoid monthly mortgage insurance. In others, paying PMI on one loan may be simpler or less expensive overall.
Another factor is what happens later. Borrower-paid monthly PMI can usually be canceled once the loan reaches the required equity threshold, while a second mortgage remains in place until it is paid off or refinanced. A piggyback structure can also complicate a future refinance, because the second-lien holder generally has to agree to remain subordinate or the second loan has to be paid off.
For some borrowers, an 80/10/10 works well. For others, paying PMI for a period of time, using a different low-down-payment option, or waiting until they can put more down may be the better fit.
If you’re deciding between an 80/10/10 piggyback loan and other ways to buy with less than 20% down, focus on a few practical questions:
A simple way to think about it: if keeping the down payment at 10% matters most and the combined cost still works in your favor, an 80/10/10 may be worth exploring. If simplicity, easier qualification, or a clearer path to removing extra cost later matters more, a single loan with borrower-paid PMI may be the better choice.
Sammamish Mortgage can help. We serve clients across Washington, Idaho, Colorado, Oregon, and California. Since 1992, we’ve been providing several mortgage programs and products with flexible qualification criteria to borrowers across the Pacific Northwest. Visit our website to get an instant rate quote or to use our online mortgage calculator. Or, reach out to us if you are ready to get pre-approved for a mortgage.
Not always. The better comparison is the total cost of the first mortgage plus second mortgage versus a single first mortgage with borrower-paid PMI. A piggyback loan avoids monthly PMI, but the second mortgage may have a higher interest rate, separate closing costs, and its own monthly payment.
Qualification depends on the lender and the borrower profile, but you generally have to qualify for both the first mortgage and the subordinate second loan. Lenders also review the combined loan-to-value ratio and documentation for the second lien.
Yes, some first-time buyers in Washington State may use this structure if they meet the lender’s underwriting standards and have the required down payment and cash to close. It is not automatically the best fit for every first-time buyer, especially if a single-loan option is simpler or more affordable.
The main downsides are added complexity, two monthly payments, possible closing costs on both loans, and the likelihood that the second mortgage carries a higher rate than the first. If the second loan is adjustable, the payment can also change later.
Possibly, but it depends on your equity, rates, and lender requirements at that time. A future refinance can be more complicated because the second-lien holder may need to agree to subordinate the loan, or the second mortgage may need to be paid off as part of the new financing.
It can be, but avoiding PMI is not automatically the lowest-cost choice. The more useful comparison is the total cost of putting 20% down versus using an 80/10/10 structure or one conventional loan with borrower-paid PMI.
An 80/10/10 piggyback loan is one common structure used to avoid PMI. It uses an 80% first mortgage, a 10% second mortgage, and a 10% down payment so the first loan stays at an 80% loan-to-value ratio.
One option is an 80/10/10 piggyback loan, where 10% is paid as the down payment and the remaining amount is split between an 80% first mortgage and a 10% second mortgage. This can avoid PMI because the first mortgage stays at 80% of the home value.
An 80/10/10 uses two loans and a 10% down payment to avoid borrower-paid monthly PMI on the first mortgage. Lender-paid mortgage insurance is a different setup, and the tradeoff should still be evaluated based on the total monthly and long-term cost rather than the label alone.
In many cases, borrower-paid monthly PMI can be canceled once the first mortgage reaches the required equity threshold. A second mortgage in a piggyback structure does not cancel on its own and usually remains until it is paid off or refinanced.
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