Introduction: The HELOC Strategy That Saves You Big
If you’re an investor or homebuyer trying to minimize out-of-pocket costs and boost long-term ROI, there’s a savvy strategy you should know about: the piggyback HELOC. This lesser-known method can help you avoid private mortgage insurance (PMI) and reduce your monthly payments—all while preserving flexibility and liquidity.
What Is a Piggyback HELOC?
A piggyback loan—often called an 80/10/10 loan—involves using a traditional first mortgage for 80% of the purchase price, a HELOC for 10%, and then contributing 10% as a down payment.
- 80%: First mortgage (conventional loan)
- 10%: HELOC (second loan)
- 10%: Your down payment
This structure keeps your primary loan at or below the 80% loan-to-value (LTV) threshold—avoiding PMI—while allowing you to put down less than 20%.
The Real Cost of PMI—and Why You Should Avoid It
PMI is required on most conventional loans when your down payment is below 20%. While PMI rates vary, they typically range from . For example:
