What is a piggyback HELOC, and should I consider one?

Buying a home can be a tall order for many in the U.S. today, with median home prices at $396,000 in 2025, according to Bankrate. Thankfully, there are ways to help make home ownership more feasible, one of which is a piggyback HELOC. While many people are unaware of piggyback HELOCs, they may help prospective homebuyers better afford a home. Learn more about what a piggyback HELOC is and when to consider one.

What you’ll learn:

• What is a piggyback HELOC?
• When should I consider a piggyback HELOC?
• What are the drawbacks of a piggyback HELOC?
• How do I get started with a piggyback HELOC?

What is a piggyback HELOC?

A piggyback HELOC involves taking out two loans at the same time when purchasing a home—one for the mortgage itself and a secondary HELOC (home equity line of credit). They’re typically used to help prospective homebuyers lower their overall monthly housing payment by avoiding extra expenses like private mortgage insurance (PMI).

Take this common example of a piggyback HELOC: A prospective homebuyer has found a home they want to buy but only has a 5% down payment saved. They take out a mortgage for 80% of the home’s purchase price and then get a piggyback HELOC to cover the remaining 15% not covered by the mortgage or their down payment. Because the mortgage itself is only 80%, this homebuyer avoids PMI.

The name “piggyback” refers to the HELOC’s role in the overall loan structure. The HELOC serves as a smaller, secondary loan that supplements the primary mortgage and is taken out at the same time. In other words, the primary mortgage is “piggybacked” by the HELOC.

When should I consider a piggyback HELOC?

The main reason to consider a piggyback HELOC is when you don’t have a 20% down payment ready when buying a home. This is because lenders typically require PMI for down payments under 20%, which adds an extra expense to your total monthly cost of homeownership. PMI typically costs from 0.58% to 1.86% of the original mortgage amount, according to NerdWallet.

It may be worth considering a piggyback HELOC even if you have the cash for a 20% down payment. When determining your down payment, it’s important to make sure you keep some money left over in savings. You’ll want an emergency fund more than ever when becoming a homeowner, as many unexpected home repairs, such as needing roof repairs or a new heater, can be quite costly.

The piggyback HELOC strategy can also come in handy to bridge the gap between when a homebuying opportunity comes up and when you have cash ready for a downpayment. While it’s ideal to buy a home when you have your full downpayment ready, life often doesn’t work out that way. If the perfect homebuying opportunity comes up while you’re actively saving for a downpayment, you can still go through with the purchase. For example, maybe you have an annual bonus you want to use towards your downpayment, but your dream home comes on the market a few months too soon. You can take out a piggyback HELOC and pay it off once your bonus hits.

Finally, piggyback HELOCs can help you stay under conforming loan limits, which avoids the tougher qualifications and pricing of jumbo loans. The conforming loan limit is the maximum amount a buyer can borrow for a conventional mortgage. While the exact amount varies by county, it’s $806,500 in most of the U.S.

Overall, these benefits mean you may be able to lower your monthly housing costs and afford more home than you otherwise would.

What are the drawbacks of a piggyback HELOC?

While piggyback HELOCs can be a great solution for some homebuyers, there are a few reasons why they don’t make sense for everyone. For instance, one of the primary benefits of a piggyback HELOC is avoiding PMI, but if you already plan to put down a 20%+ down payment, this shouldn’t be a concern. While Piggyback HELOCs can save you money over PMI, it’s often a wise choice to put more money down if you have the means to do so.

Additionally, the piggyback HELOC will likely have a higher interest rate than the primary mortgage, and unlike many mortgages that are fixed rate, the piggyback loan will likely be variable. This means your total monthly housing costs can change from month-to-month.

Because the financial side of homeownership is complex, it’s important to run the numbers on your individual homebuying situation to see if a piggyback HELOC is advantageous. Consider factors such as the purchase price of your home, what funds you have available for a down payment and how your overall monthly cost would differ by taking out a piggyback HELOC versus PMI.

How do I get started with a piggyback HELOC?

A great way to get started with your homebuying journey is to get preapproved for a mortgage. This will give you a good baseline (albeit not a guarantee) of how much home you can afford. It’s a good idea to consider your personal budget as well, which a preapproval application may not be able to account for. For example, a preapproval application can take into account a monthly student loan payment you make but won’t factor in your regular entertainment expenses you’d like to continue with.

Once preapproved, connect with a mortgage loan officer, who can walk you through your available mortgage options and determine a solution that leaves you happy with both your home and overall financial picture. It’s during this stage that you can explore whether a piggyback HELOC makes sense, which the mortgage loan officer can help you determine.

If you decide to move forward with the piggyback HELOC, you will apply for both the mortgage and the piggyback HELOC simultaneously. Your mortgage loan officer will be there to walk you through that process and ensure both loans are set up to help you better afford your home.