The traditional 20% down payment, which eliminates the need for homeowners to pay private mortgage insurance (PMI), has become increasingly difficult to afford in today’s market due to high home prices.
With less than 20% down, the homebuyer then must be able to take on the additional costs of PMI, which can add hundreds of dollars per month to their mortgage payment.
Lenders can help make homeownership more affordable for their customers with a piggyback HELOC through Figure’s platform. This offers buyers the additional funds to make their full down payment. Read on to learn how it works.
Partner with Figure to help your customers afford the home of their dreams.
Why PMI is a costly burden for today’s homebuyers
The average cost of PMI typically ranges from 0.5% to 1% of the loan amount per year.
For a $700,000 mortgage, this can translate to:
$3,500 to $7,000 per year
$292 to $583 per month
The amount depends on the loan type, credit score, and down payment amount.
This additional cost can make monthly mortgage payments unaffordable for many buyers, pushing them to delay or forgo their purchase.
How piggyback HELOCs solve PMI concerns
If your customers have at least 10% to put down, you can offer them a piggyback HELOC through Figure’s platform to finance their home while avoiding PMI.
A piggyback HELOC is an additional loan taken out with the primary mortgage as a home equity loan for homebuyers. It typically is structured as an 80/10/10 agreement, which allows buyers to reduce their primary mortgage’s loan-to-value (LTV) ratio to 80% and eliminates the need to pay PMI.
Here’s how it works:
80% first mortgage: The primary mortgage covers 80% of the home’s purchase price, which stays within conventional loan limits to avoid PMI.
10% piggyback HELOC: The piggyback HELOC is the second lien, covering an additional 10% of the home’s cost. This is secured by the property’s equity and structured as a home equity line of credit (HELOC).
10% down payment: The remaining 10% is the buyer’s contribution, which minimizes the amount of cash needed compared to a standard 20% down payment.
Both the first lien mortgage and second lien HELOC close on the same day.
Piggyback HELOC example for a $700,000 mortgage
A homebuyer with a $700,000 mortgage and a 10% down payment.
10% of $700,000 = $70,000
The buyer applies for a primary mortgage with an 80% LTV to avoid PMI.
80% of $700,000 = $560,000
The buyer has covered $630,000 of the loan amount but needs $70,000 or 10% more of the purchase price. To cover the $70,000, they apply for a piggyback HELOC through Figure’s platform.
The HELOC is secured against the property’s value, with a five-year draw period.
How a piggyback HELOC through Figure’s platform is your competitive edge
According to National Mortgage Professional, piggybacked second mortgages will likely continue if affordability constraints persist.
Figure CEO Michael Tannenbaum says offering a piggyback is in “direct response to partner feedback.”
“We’ve become known for a five-day digital HELOC that boasts low costs and high customer satisfaction, and our growing number of lending partners made it clear they want to embed our new piggyback to better meet their customers’ needs,” Tannenbaum said.
From June 2024 to July 2024, CoreLogic found that the percentage of piggybacked loans for conventional borrowers rose from 2.2% to 3.6%.
A piggyback HELOC through Figure’s platform offers mortgage loan officers a simple, transparent process, including:
Transparency through underwriting, processing, closing doc generation, and funding, with visibility into the piggyback status
Easy-to-use prequalification calculator to run piggyback scenarios with multiple FICO/CLTV combos for first-lien LLPA reductions
Delegated UW completed in your LOS with second piggyback approval based on approved/eligible AUS
Reduced manual work to share data in our portal—simply import the Piggyback MISMO and view and update as needed
Minimal clear-to-close conditions translate to minimal closing delays
Streamlined interface to upload required collateral docs to our portal post-close in support of pre-purchase review
We want to help our partners close more conventional purchase loans in today’s market with a streamlined, efficient process from start to close.
The Figure difference: Creativity and cutting-edge technology
A 20% down payment plus mortgage insurance costs are significant financial hurdles in today’s market. For our $700,000 mortgage example, putting down $140,000 is out of the question for many buyers—especially for those struggling with debt and other financial obligations.
Lenders and homebuyers alike are seeking modern, creative financing solutions backed by cutting-edge technology. A piggyback HELOC through Figure’s platform is fully automated and designed for speed, so we won’t slow down your closing!
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