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What Is A Mortgage Combo Loan?

By Jim Micheals

A mortgage combo loan, sometimes referred to as a piggyback loan, consists of two mortgage loans used together with either a refinance or purchase.

Combo Loan Liens

Both loans are used against the same property with the first loan taking the first lien. It is easier to have both loans with the same lender, but in aggressive markets lenders often allow borrowers to have the second lien mortgage with another lender. Many times, the mortgage with the first lien uses 70 to 80 percent of the property’s purchase price.

Including other debts

The combo loan has changed some to include a home mortgage and other debts, including credit cards. Borrowers are now given an option when buying a home. Someone who chooses to have a second mortgage when purchasing a home and not put more money down allows him or her to write off more into interest payments on income taxes.

100% financing

Combo loans have been a tool to help make the purchase of a home more affordable. It is very common for a borrower to look for an 80/20 combo loan, but today there are combo loans where 100 percent financing is available. With this option, lenders do require the first loan in the package to be set up as a fixed loan. The second is usually either a 15-year fixed mortgage (closed-end second) or a home equity line of credit.

Benefits of a Mortgage Combo Loan

1. No down payment. The first mortgage covers most of the home price and the second mortgage covers the down payment.
2. Avoid PMI. This is an alternative with combo loans.
3. Securing lower interest rates. When signing two loans, the rate on the first is lower.
4. More loan options. Many times two loans provide the borrower more financing money.

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4. Can I Get A 30 Year Fixed Rate Mortgage With A IRS Tax Lien
5. Does My Debt To Income Ratio Affect My Mortgage Rate?