How a Combo Loan Works

A combo loan splits your purchase into a first mortgage (typically 80% of the home's value) and a second mortgage (usually 10–15%), with the rest as your down payment. Because the first mortgage stays at or below 80% loan-to-value, you avoid private mortgage insurance — historically the whole point of the structure. The trade-off is that the second mortgage carries a higher rate than the first, so whether a combo beats a single loan with PMI depends on the gap between those rates and how long you keep the loan. When the second mortgage rate is far above the first, PMI can actually be cheaper; when the gap is small, the combo wins. Run both scenarios here before you commit.