A piggyback loan may have a strange name but it is a home financing option in which a property is purchased using more than one Home Financing from two or more lenders. This type of financing is also called an 80/20 loan. There are many variations of this loan such as an 80-10-10 loan, which can typically be defined as a 10 percent second mortgage coupled with a traditional 80 percent first lien and a 10 percent down payment. There can also be different variations to make up the difference between a conventional loan and almost any amount of down payment, such as an 80-5-15 loan. 

These types of loans have advantages and disadvantages. The good news is that this type of a loan allows the home buyer to acquire or refinance a home with less than a 20 percent down payment or equity. In addition, another benefit is that the homebuyer does not need to carry private Home Financing insurance (PMI). 

One downside of these types of loans is they typically have higher interest rates than standard loans, mainly because lenders are assuming a higher risk. Also many piggyback loans attach a large balloon payment at the end of a loan. For homeowners who don't plan appropriately, this large payment can be a large financial strain. Homebuyers who assume these types of Home Loans should be aware that if they ever need an additional Home Financing or home equity loan in the future it will be difficult to obtain.

Homebuyers can also use piggyback loans as a source of funding for making a bigger downpayment on the new home. Homeowners who don't have the funds to make the 20 percent downpayment can use this loan to their advantage because private Home Financing insurance can be expensive and is not tax deductible. 

When considering these types of loans it is important to do the math on  how much money you have available for down payment. It is important to meet with your lender so that you clearly understand your budget before looking for a new home. Be sure to keep in mind that you'll likely need to cover expenses like earnest money, Home Financing insurance and closing costs for the transaction.