The Sketchy History And Rebirth Of The Piggyback Loan
Piggyback loans soared in popularity during the housing boom that came crashing down in 2008. Because of their association with the housing bust, the reputation of piggyback loans has taken a hit. Today, however, piggyback loans are making a comeback. What has changed since the late 2000’s and why is there a resurgence in piggyback loans?
Piggyback Loans Circa 2008
During the housing boom, virtually anybody could get a mortgage to buy a house. It didn’t matter if you were a first time buyer, had less than desirable credit, or were buying a second or investment property. In fact, with a piggyback loan at the time, many didn’t even need a down payment. Known as an 80/20 loan, piggyback loans were actually two loans, sometimes financed by two separate lenders.
The 80% would cover the first mortgage, and the 2nd or piggyback loan, would cover the down payment and even closing costs. In some cases where properties were appraised high enough, borrowers could not only cover the cost of a mortgage, down payment and closing costs, but could get additional cash back…all without a down payment.