A second home loan can be either a home equity loan taken against the equity in your house (See “home equity loan” entry), or it can be second loan taken out to help cover the difference of your first loan and your down payment.

For example, if your mortgage lender requires a 20% down payment and you only have a 5% down payment, you can take out a second loan from a different lender for that 15% difference. This is also sometimes called a “piggyback loan.”

These loans are sometimes taken out to avoid private mortgage insurance payments, as sometimes the second loan might be cheaper than the amount you’d pay per month for PMI. To know which option is best for you, simply do the math.  The interest from both PMI and a second home loan are tax deductible.