Piggyback Loans in Seattle: A Second Mortgage Behind the First

A piggyback loan in Seattle is two mortgages closed on the same day for one purchase: a first mortgage, and a smaller second mortgage behind it. Buyers here use one for two reasons. It can hold the first mortgage at or under the King County limit of $1,063,750, or it can hold the first mortgage at 80 percent of the price so that loan carries no mortgage insurance.

The version most people have heard of is the 80-10-10: a first mortgage for 80 percent of the price, a second for 10 percent, and 10 percent down. In central Seattle I see the other version just as often. A buyer in Wallingford or on Capitol Hill has 10 percent down on a house priced around $1.3 million, and the single loan they would need lands over the county line. A second mortgage can absorb the overage.

For this page I read Fannie Mae's Selling Guide sections on subordinate financing, combined loan-to-value, and mortgage insurance, and Movement Mortgage's published product pages, on October 13, 2026. I say below where each one stops. One thing belongs up front. The second mortgage in a piggyback loan is not a Fannie Mae or Freddie Mac loan. Each lender that offers one sets its own pricing, fees, and underwriting, and those vary by lender and program. Nothing this site says about the terms of an agency first mortgage carries over to the second.

How a Piggyback Loan Works on a Seattle Purchase

You sign two notes and two deeds of trust at closing, and you make two payments each month afterward. The deeds of trust are recorded in order, so the first mortgage has first claim on the house and the second stands behind it. That is where the name "subordinate financing" comes from.

Fannie Mae buys first mortgages that have a second behind them, on conditions. Its subordinate financing section says the second lien must be evidenced by a promissory note, reflected in a recorded security instrument, and clearly subordinate to the first. It also requires the lender to disclose the second and its repayment terms to Fannie Mae, to the appraiser, and to the mortgage insurer if there is one. A second mortgage is never a side arrangement. Everyone in the file knows about it.

Three ratios describe a piggyback loan, and you will hear all three.

• Loan-to-value (LTV) is the first mortgage alone, divided by the lesser of the price or the appraised value.
• Combined loan-to-value (CLTV) adds the second. Fannie Mae's CLTV section counts the first mortgage, the unpaid balance of any closed-end second, and the drawn portion of a home equity line.
• Home equity combined loan-to-value (HCLTV) applies when the second is a line of credit. It counts the full amount of the line, whether or not you have drawn it.

Both payments count when you qualify. Fannie Mae's definition of the monthly housing expense includes any subordinate financing payments on the property, next to principal, interest, taxes, insurance, and dues. A piggyback loan changes how the debt is split. It does not make any of the debt disappear from underwriting.

This page covers conventional loans where the buyer chooses the structure. The second mortgages attached to down payment assistance programs follow different rules, which my Washington down payment assistance guide covers.

Piggyback Loan Reason One: Staying at the King County Limit

The 2026 loan limit for a one-unit home in King County is $1,063,750. A first mortgage at or under that figure can be sold to Fannie Mae or Freddie Mac. One dollar over and it is a jumbo, written to the rules of whichever lender or investor holds it. The limit follows the county where the house sits, not where you live now. My guide to high-balance and jumbo loans in King County explains what changes on each side of that line, so I will not repeat it here.

What matters for a piggyback loan is that the limit applies to the first mortgage. The second is a separate loan and does not count against it.

An illustrative example, October 2026. A buyer offers $1,330,000 on a Wallingford house with 10 percent down, which is $133,000. One loan for the rest would be $1,197,000, a jumbo. As a piggyback loan, the same purchase could be a first mortgage of $1,063,750, a second mortgage of $133,250, and the same $133,000 down. The first mortgage now sits at the county limit and just under 80 percent of the price. The combined loan-to-value is still 90 percent. These figures show the structure only. They are not a quote, and they do not mean any lender will approve this combination.

Whether a combination like that is allowed depends on two ceilings. Fannie Mae sets maximum combined loan-to-value ratios by property type and occupancy in its Eligibility Matrix, and the lender making the second sets its own. I do not print either number here. They change, and the second lender's ceiling is often the one that decides the file.

There are simpler ways to get under the line. More cash at closing does it with no second loan at all. And a jumbo is not a penalty. For some borrowers it is the stronger fit, which is why I price all three. The Seattle jumbo mortgage guide and the 10 percent down jumbo page cover that side.

Piggyback Loan Reason Two: No Mortgage Insurance on the First

Fannie Mae's mortgage insurance section requires primary mortgage insurance on a conventional first mortgage with a loan-to-value ratio above 80 percent. On a purchase, the value in that ratio is the lower of the sales price or the appraised value. The test looks at the first mortgage. A first mortgage at 80 percent does not trigger it, even with a second mortgage behind it.

An illustrative example, October 2026. A buyer pays $950,000 for a Capitol Hill townhome with 10 percent down, which is $95,000. One loan would be $855,000 at 90 percent, with mortgage insurance. As an 80-10-10, the first mortgage is $760,000, the second is $95,000, and the down payment is the same $95,000. In this case the first mortgage also drops below the national baseline limit of $832,750, so it is a standard conforming loan and not a high-balance one. Again, structure only, not a quote.

You have not removed a cost. You have swapped one for another: a mortgage insurance premium for a second loan payment. Two facts make the swap less obvious than it looks.

• Mortgage insurance on a conventional loan is built to end. My guide to removing PMI in Seattle covers the three ways it comes off. A second mortgage ends when you pay it off.
• Mortgage insurance comes in more than one form. Fannie Mae's guide lists monthly, annual, single-premium, and split-premium plans. A fair comparison puts the piggyback loan next to each plan you may qualify for, and not only next to the monthly one.

The Second Mortgage in a Piggyback Loan: Fixed Second or HELOC

The second lien usually takes one of two forms.

• A closed-end second. You receive the whole amount at closing and repay it on a set schedule. Fannie Mae describes a closed-end loan as one where the borrower draws all funds on day one and cannot access paid-down principal afterward.
• A home equity line of credit (HELOC) opened at purchase. You draw the amount you need at closing. The rate is usually variable. My HELOC and cash-out refinance guide explains how draw and repayment periods work.

Fannie Mae limits what the second can look like when it sits behind a loan it buys. The payments have to cover at least the interest due, so the balance cannot grow. If a second other than a HELOC has a variable rate, its payment has to hold steady for each 12-month period. HELOC payments are allowed to move. And a second that does not fully pay itself off cannot come due less than five years after the first mortgage begins, with narrow exceptions.

Where the second comes from. Movement Mortgage publishes two second-lien products: a Fixed Rate Second Lien and a home equity line of credit. Both pages describe them as ways for a homeowner to reach equity without refinancing the first mortgage. Neither page says whether the product can close alongside a purchase, so I do not promise that here. I confirm it on the actual file. When the second cannot come through Movement, structures like this are completed with a second from another lender, often a bank or credit union, that closes the same day. That means a second application, a second set of disclosures, and an escrow officer coordinating two lenders.

Whoever makes it, the second is priced and underwritten on that lender's terms. Its rate is typically higher than the first mortgage's, because the second lender is paid only after the first if things go wrong. Its fees and qualifying rules vary by lender and program and are subject to change.

How to Compare a Piggyback Loan With a Single Loan

A buyer near the line usually has four choices: a piggyback loan, one high-balance loan with mortgage insurance, one jumbo loan, or more cash down. I do not think any of them wins by default. Here is what I put side by side.

1. The monthly total. First mortgage payment plus second mortgage payment, against one payment plus mortgage insurance, against the jumbo payment. If the second has a variable rate, ask for its payment today and its payment at the highest rate the note allows.
2. The price of the first mortgage. Fannie Mae's guide says a loan-level price adjustment applies to certain mortgages with subordinate financing. In plain terms, a first mortgage with a second behind it may not be priced the same as that first mortgage alone. My guide to how mortgage rates are priced explains what those adjustments are.
3. The cost to close. Two loans can mean two sets of lender fees and two recordings. Ask for a Loan Estimate on each loan and read them together. Comparing mortgage offers in Seattle shows which lines to line up.
4. The cost over the time you expect to keep the loan. This is the comparison that decides it. Mortgage insurance may come off in a few years. A second mortgage runs until it is paid. Add each option up over five years, or seven, or however long you believe you will hold it.
5. What it does to your next move. A second lien has to be dealt with every time you refinance. The next section covers that.

When I run this for a client, the answer changes with the numbers. On some files the piggyback loan is clearly lower in monthly and total cost. On others one loan with mortgage insurance costs less and leaves a simpler file. I would rather show you the three columns than tell you which one to like.

Refinancing After a Piggyback Loan: Subordination

This is the part buyers hear about last, and it is the one I bring up first.

Suppose you want to refinance the first mortgage later and leave the second alone. The new first mortgage would be recorded after the existing second, which would put the second in first position. No first-mortgage lender accepts that. Fannie Mae's subordinate financing section requires a resubordination agreement to be signed and recorded when a second stays in place through a refinance. It makes an exception where state law lets the second keep its position without one. Whether that applies to a given Washington lien is a question for the title company, and I do not assume it.

In practice, the lender holding your second has to agree. It has its own request process, its own timeline and fee, and its own limit on how large the new first mortgage can be relative to the value of the house. A slow answer can outlast a rate lock, which my rate lock guide explains. Before you choose a second, ask its lender how subordination requests are handled.

The other route is to pay the second off with the refinance. Here the guide draws a distinction worth knowing. Fannie Mae treats a refinance that pays off the first mortgage and a purchase-money second, with no cash taken out, as a limited cash-out refinance. Paying off a second that was not used to buy the house makes it a cash-out refinance, which is underwritten and priced differently. Keep your closing documents from the purchase. They are the proof that the second was part of buying the home. My Seattle refinance guide walks through both transaction types.

When a Piggyback Loan Is the Wrong Tool in Seattle

• You expect to sell or refinance within a few years. The added cost of closing two loans has less time to earn itself back.
• The second is variable and your budget is tight. A line of credit that is comfortable at today's payment can be uncomfortable at a higher one. If a rising payment would strain you, a fixed second or a single loan is the calmer choice. My adjustable-rate mortgage guide covers how to think about a payment that can move.
• You are close to 20 percent down already. A small amount of additional cash, including a documented gift, may do the same job with one loan. See my gift funds guide.
• Your qualifying ratios are near their limit. Both payments count. A second with a short repayment term can carry a higher payment than the mortgage insurance it replaced.
• The appraisal is a risk. Every ratio uses the lesser of the price or the appraised value. If the appraisal comes in short, the loan-to-value and the combined loan-to-value both rise, and two lenders have to be satisfied instead of one. My low appraisal guide covers the options.
• The second lender is not lined up before you write the offer. On the standard Northwest MLS financing addendum, changing the loan type or the lender after the offer is accepted, without the seller's written consent, can waive the financing contingency. Decide on the structure first. My guide to the financing contingency in a Seattle offer explains that clause.

What I Ask Before Recommending a Piggyback Loan

1. What is the price range, and how much are you putting down? That tells me whether the question is the county limit, mortgage insurance, or both.
2. How long do you expect to keep this house and this loan? The holding period drives the comparison more than anything else.
3. Do you expect a lump sum? Many of my South Lake Union clients plan to pay a second down as stock vests or a bonus arrives. That can work well, as long as the plan still holds if the money comes later or smaller than expected. My RSU income guide covers how that income is treated when you qualify.
4. What will you have left after closing? Keeping cash in reserve is a fair reason to borrow more. It should be a decision, not an accident.
5. Who is making the second? I want that lender's rate, fees, repayment terms, and subordination practice in writing before you rely on the structure.

If you are at the beginning, how to get a mortgage in Seattle lays out the whole sequence, and the Wallingford, Capitol Hill, and South Lake Union home loan guides cover the neighborhoods where purchase prices most often put a loan near the county limit.

FAQ: Piggyback Loans in Seattle