A piggyback loan is a package of mortgages that are taken out as an alternative to private mortgage insurance.

Homebuyers who borrow more than 80 percent of the home’s purchase price generally must buy mortgage insurance, which remains in place until their equity in the home reaches 80 percent.

Instead of paying for mortgage insurance, it’s sometimes cheaper to borrow 80 percent of the purchase price with a first mortgage and take out a second mortgage (a home equity loan or line of credit) for the rest.

In an 80-20 piggyback loan, the buyer borrows 80 percent of the price with a first mortgage and 20 percent with a second mortgage. In the 80-10-10 version, the buyer borrows 80 percent with a first mortgage, 10 percent with a second and puts 10 percent down.

A piggyback loan might or might not be cheaper than mortgage insurance depending on interest rates, the borrower’s credit score and tax situation, the size and nature of the loan and other factors. To see which is cheaper, try these calculators at http://www.goodmortgage.com/calc_PMI_or_piggyback.htm or http://www.mtgprofessor.com/calculators.htm.

Note: A second mortgage is usually tax deductible; private mortgage insurance may or may not be depending on the year and the borrower’s income. Make sure you take that into account.