Also known as 100-percent financing and as a piggyback loan, the 80/20 mortgage is best-known for providing a means to purchase a home without coming into the transaction with a down payment.

It is often used by a borrower (usually with great credit) that cannot come up with the traditional 20-percent down payment for a conventional mortgage, but does not want to have to pay private mortgage insurance (PMI) to secure the loan.

Instead, the borrower will take an additional mortgage (not to be confused with a second mortgage) [it is a second mortgage, second refers to lien order, and that's what 80/20 financing is: a lien in first position, and a lien in 2nd position.] in order to secure the principal mortgage. The additional mortgage "piggybacks" the first, creating a situation where the borrower is financing 100 percent of the home.

• advantages: Although the interest rate of the piggyback mortgage is higher than the rate of the first loan, the overall cost is less than paying PMI.

  You could also find that the closing costs of the two mortgages overlap. For example, many title companies would charge you once for both transactions.

• disadvantages: The borrower could likely have to pay two sets of closing costs since the loans usually come from different mortgage lenders. This could be especially true if financing through a broker. Also, since the home is entirely financed, if it should lose value, the borrower cannot sell the home or refinance until the loan is paid in full.