What financing option allows borrowers to combine their first and second mortgages into one loan?

The financing option that allows borrowers to combine their first and second mortgages into one loan is known as a piggyback loan. This approach is particularly advantageous for homeowners who wish to avoid private mortgage insurance (PMI) by using a second mortgage to cover a portion of their down payment. In a piggyback loan scenario, one loan typically covers up to 80% of the home’s value (first mortgage), while the second loan takes care of an additional 10-20%, which helps the borrower meet the required down payment without incurring unnecessary costs associated with PMI.

This strategy can simplify monthly payments, reduce overall borrowing costs, and provide a streamlined approach to managing debt, as it effectively consolidates multiple loans into one payment structure. Borrowers benefit from the convenience and often lower interest rates of a combined loan, making this option an attractive solution in the mortgage landscape.