Piggyback Loan
”Piggy Back Loan” is a slang term, which really is another way of describing a 1st and 2nd Trust Deed that are closed concurrently at the close of escrow. This combination of a 1st and 2nd Trust Deed can be effectively utilized to avoid the need to pay private mortgage insurance. The borrower may apply for a loan at 90% with the same 10% down payment. A 1st Trust Deed at 80% and a 2nd Trust Deed at 10% could be procured concurrently. The interest rate on the 2nd Trust Deed is typically higher, often a double-digit figure. However, the fact that the interest can be deducted on the 2nd Trust Deed often makes this a prudent financial option for the borrower. The net result is often cheaper than borrowing 90% of the financing as one loan and incurring a private mortgage insurance payment. See Private Mortgage Insurance.
