Core Concept - A home equity loan allows homeowners to borrow against the equity in their home, providing cash for various expenses such as renovations or tuition [1][2]. Home Equity Loan Overview - A home equity loan is classified as a second mortgage, enabling homeowners to maintain their primary mortgage while taking out an additional loan [1][16]. - Borrowers receive a lump-sum payment and repay it in fixed monthly payments over a term typically ranging from five to 30 years [2]. Borrowing Capacity - The amount that can be borrowed through a home equity loan is influenced by the home's value, loan-to-value (LTV) ratio, and combined loan-to-value (CLTV) ratio [3][6]. - Lenders usually require an appraisal to determine the current market value of the home before calculating LTV and CLTV ratios [3]. Loan-to-Value Ratio (LTV) - LTV is calculated by comparing the mortgage balance to the home's current market value, expressed as a percentage [4]. - For example, if a home is valued at $500,000 and the mortgage balance is $325,000, the LTV ratio is 65% [5]. Combined Loan-to-Value Ratio (CLTV) - CLTV considers both the primary mortgage and the home equity loan when determining borrowing capacity [7]. - For instance, if the primary mortgage is $325,000 and the homeowner wishes to borrow an additional $50,000, the CLTV would be 75% [8][10]. Borrowing Limits - Many lenders allow a maximum CLTV of up to 85%, meaning if the CLTV exceeds this threshold, borrowers may need to seek lenders with higher limits or reduce the loan amount [9]. - In a scenario where the primary mortgage is $240,000 and the home value is $320,000, the maximum amount that can be borrowed through a home equity loan would be $32,000, assuming an 85% CLTV [10][11]. Additional Factors Influencing Borrowing - Lenders assess several factors beyond LTV and CLTV, including credit score, income, debt-to-income (DTI) ratio, and home equity percentage [12][13]. - A minimum credit score of 680 is often required, and lenders typically expect at least 15% to 20% equity in the home for eligibility [13]. Minimum Loan Amounts - The minimum amount that can be borrowed varies by lender, with some requiring a minimum of $10,000 to $45,000 for home equity loans [14].

Core Insights - A piggyback loan involves taking out a second mortgage alongside a primary mortgage to finance a home purchase, allowing buyers to avoid private mortgage insurance (PMI) and jumbo loans [2][3][5] Summary by Sections Definition and Structure - A piggyback loan consists of two mortgages: the primary mortgage typically covers 80% of the home price, while the piggyback loan covers a portion of the down payment, often structured as 80-10-10 [2][6][7] Scenarios for Use - Piggyback loans are beneficial for buyers who cannot afford a 20% down payment to avoid PMI, which can cost between $30 to $70 per $100,000 borrowed [3] - They are also useful for purchasing homes exceeding the conforming loan limit, which is $806,500 in 2025 and will rise to $832,750 in 2026 [4] Types of Piggyback Loans - Piggyback loans can be structured as home equity loans or home equity lines of credit (HELOCs), with home equity loans providing a lump sum and HELOCs offering a revolving line of credit [9][10][11] Pros and Cons - Advantages include lower upfront cash requirements, avoidance of PMI, and the ability to stay within conforming loan limits [12][18] - Disadvantages include potentially higher interest rates on the second mortgage, stricter qualification requirements, and the need to pay closing costs for both loans [12][18] Qualification Criteria - Qualifying for a piggyback loan typically requires a good credit score (usually 700 or higher) and a debt-to-income ratio (DTI) of 43% or lower [15][16] Alternatives to Piggyback Loans - Alternatives include FHA loans, USDA loans, VA loans, and conventional loans with lower down payment options, which may be more accessible for some buyers [19][20][21][22] Refinancing Options - Piggyback loans can be refinanced to obtain lower interest rates or consolidate into a single mortgage, but this typically requires a good credit score and sufficient home equity [23]