Second Mortgage

Wednesday, January 16, 2008

Second Mortgage: How it works

New York, NY August 6, 2006

Second mortgage is a secured loan that is subordinate to first loan against the same property. More specifically speaking it is the 'second loan' in sequence.

In real estate, a property can have multiple loans against it. The loan, which is registered with county or city registry, first is called the first mortgage. The loan registered second is called the second mortgage. A property can have a third or even fourth mortgage, but those are not common.

If mortgage loan goes into default, the first mortgage gets paid off before the second mortgage gets any money. Thus, second mortgages are riskier for the lender, who generally charges a higher interest rate. Rates and other charges might be greatly differentiated. That is why refinancing second mortgage requires more research.

Generally speaking, you may get second mortgage in two ways: First, you may own a home with equity. Second, you may get it while you are buying your home.

Second Mortgage as Home Equity Loan

The maximum amount of money that can be borrowed as second mortgage is determined by various factors, including credit history, income, and the appraised value of the home etc. It is common to be able to borrow up to 100% of the appraised value of the home, less any liens, although there are lenders that will go above 100% when doing over-equity loans.

Second Mortgage and First Mortgage Together

In some instances you may want to get second mortgage while buying your home. This is also called 80/20, 85/15 loan or 100% financing. It gives you ability to buy a home with almost no-money down. If you have a strong credit profile but have limited funds to commit to a down payment, 80/20 mortgages might be right for you. Lenders typically require a down payment of at least, 3 to 20 percent of the purchase price. If the mortgage loan amount is for more than 80 percent of the purchase price, private mortgage insurance (or PMI) is usually required.

You can avoid paying PMI by getting a second mortgage (piggyback loan) to back up your first mortgage. The first mortgage is provided for 80 percent of the cost of the mortgage and the 'piggyback' second mortgage is for the remaining 20 percent. The 80 percent first mortgage can be a fixed-rate (15-years or 30-years), adjustable-rate (usually 5/1, 7/1 or 10/1 fixed period ARM) or interest-only loan.

The 20 percent second mortgage can be a home equity line of credit that changes with the prime rate. Combined, the two loans allow you to purchase 100% of your home with no money down.

Second Mortgage Rates

For the reasons explained in above paragraph, second mortgage rates are higher then first mortgage rates. If you have a fixed rate second mortgage loan, the interest rate is set for the life of the loan. Many companies offer also variable rate second mortgages, also known as adjustable rate mortgages or ARMs. These provide for periodic interest-rate adjustments. If you have adjustable rate this allows the lender to adjust or change the interest rate. These interest changes should have upper and lower limits, as well as ‘caps’. Be sure you understand your rights and obligations before you make your decision.

Factors to Consider before getting a Second Mortgage

1. The length of your second mortgage - when is repayment of the loan required?

2. Look at payment calculations -- how much will your monthly payments cost and what will that cover?

3. Look at all of the costs associated with getting a second mortgage.

4. Check what kind and amounts of additional fees required for getting a second mortgage. (Percentage, or points, or flat fees).

5. What is the interest rate?

Demir Caner
http://www.cane2.com Consumer Action Network

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The Benefits of a Second Mortgage

By John Gibb

So why get a second mortgage? Well, there are all sorts of reasons that you might want to free up the equity locked up in your home. You might not have considered that you could use a second mortgage to pay for so many different things, but in practice most second mortgage providers are not overly concerned what you decide to spend your money on.

Most people use the money to consolidate their other debts, which can be a good move – as long as you then resolve to keep that as the only debt you have.

Another common reason to get a second mortgage is to finance home improvements and increase the value of your property still further. This can be a risky move, but if you know what you’re doing, it pays off. Taking out a second mortgage to do something like build a conservatory is generally quite stupid, as they are unlikely to make back anywhere near what you paid for them. Wooden floors and second bathrooms, on the other hand, are always sound investments if they are not already present.

Of course, if you’re planning to invest the money, there’s nothing to say that you have to invest it in your own home. Some daring souls take the money and plough it into the stock market, or invest in starting up a business. The risk of failure is massive in such ventures, but if you pull it off, you’ll be doing really well.

On the whole, it isn’t such a great idea to use a second mortgage to take money that you have no way to recoup. If you spend it on a car, for example, you have no way of getting all the money back, as cars lose massive amounts of value the second you drive them out of the dealership. This is even more true for holidays, and college or university tuition.

John Gibb is the owner of second mortgage guide For more information on second mortgages check out http://www.2nd-mortgage-guidance1k.info

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Second Mortgage Information

By Steve Valentino

A mortgage is a long-term loan that borrowers take either to buy a new home or to raise money based on the value of their their existing homes. When home owners are faced with tight and difficult financial situations, they can choose to take a mortgage on their houses. This requires the borrowers to offer their homes as a collateral for the mortgage loan. This may put the home at risk if the payments are late. The loans with a large final payment may make the debtors borrow more money to pay it off within the set time period. There are other ways to borrow money from financial institutions. One such available option is securing a second mortgage loan. This places an additional mortgage on the property; but second mortgage money is given out as a lump sum amount and not as cash advances. This helps to put a check on over spending. Another advantage of second mortgages is that they usually offer fixed interest rates and fixed payment amounts.

Some borrowers may be a little skeptical about getting a second mortgage, as the risk on the property increases. If the borrowers are not able to make the payments, the house may be sold to recover the loan amount. The first consideration at this time goes to the first mortgage company. The second mortgage company will only get the amount left over. Therefore, the rates are higher for a second mortgage, as the risk factor is greater.

Borrowers can also choose an alternative to a second mortgage if they do not want to put their homes at risk. They may opt to borrow from credit lines that do not require the property to be signed as collateral. Such credit lines are generally available with unsecured credit lines that allow the customers to work along the lines of their requirement.

Mortgage Information provides detailed information on Mortgage Information, Reverse Mortgage Information, Mortgage Information Services, Mortgage Refinance Information and more. Mortgage Information is affiliated with Mortgage Rate Calculators.

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What is a Second Mortgage

By Gaurav Bhola

A second mortgage is a secured mortgage loan which is secondary to another loan against the same asset. In the real estate arena, a singular property can have numerous loans against it. The mortgage loan that is duly registered foremost with the proper state, city or county agency is classified as the first mortgage. Hence, the mortgage loan registered second is classified the second mortgage, a third loan against the same property is considered a third mortgage, and so on. So the same property can have multiple mortgage loans.

A second home mortgage loan is also called a subordinate mortgage because if this loan goes into default, the primary or first mortgage is paid in full then, the second mortgage receives any money. Due to this reason, second mortgage lenders are taking on more risk, thus they pass on some of the risk to you by charging a higher interest rate. If you are thinking about taking out a second mortgage make sure that you can afford to do so and are prepared to place yourself in more challenging financial circumstances with regards to your mortgage loan.

Once upon a time second mortgage loans had a stigma of financial hardship attached to the homeowner who sought the loan. However, overtime this is no longer the case and there is wide spread appeal and acceptance of second mortgages.

Types of Second Mortgages:

· Home Equity Line of Credit

· Home Equity Loan

· Traditional Mortgage

A second mortgage may be good option for:

· Home improvement

· Home renovation

· College tuition

· Debt consolidation

· Emergencies

Make sure you get a free second mortgage rate quote to see if it makes sense for your specific financial goals.

http://www.ehomemortgages.com/

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Second Mortgage 101

By Kristy Annely

How do second mortgages work?

More commonly known as a home-equity loan, a second mortgage is a type of secured loan that you take out on your property using the equity it has. The amount of money you will be allowed to borrow is based on the market value of your property minus your balance from the first mortgage. For example, if you own property that has a market value of $100,000 with a balance of $40,000, then you have a $60,000 equity credit line. You would then be allowed to borrow up to that much for your second mortgage.

Why make use of your equity?

There are times when you may need money in order to pay for certain things. Making improvements in your home and purchasing new appliances are just some of the more common reasons. A second mortgage might be more beneficial to you financially than using conventional credit cards because the interest rates on home-equity loans are much lower. This is due to the fact that it is a secured loan. In certain circumstances, it might even be possible to have the interest you pay in a second mortgage become tax deductible.

Two Types of Home-equity Loans

There are two types of loans you can choose from if you are a property owner looking to get a home-equity loan, open-end loans and closed-end loans.

With a closed end loan, the borrower will receive one lump sum up to 100% of the value of the property, minus any liens. If you choose this type of loan, you would not be able to borrow anymore after that first initial payoff.

An open-end loan revolves. This means you will be able to choose when and how often you want to borrow. You will also be able to borrow up to 100% of the value of your property, minus any liens.

2nd Mortgage provides detailed information on 2nd Mortgage, Refinance 2nd Mortgage, Bad Credit 2nd Mortgage, 2nd Mortgage Loans and more. 2nd Mortgage is affiliated with 1st Mortgage Rate.

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Second Mortgage Basics

By C.L. Haehl

There are many reasons that you may choose to take out a second mortgage on your home. You may need to send your child to college and don’t have enough in savings to cover the cost of tuition or you may need to make some major repairs to your home. Deciding if a second mortgage is right for you is difficult and deciding which second mortgage is the one you need can be even more confusing.

There are two types of second mortgages. These are home equity loans and home equity lines of credit, also called HELOC. Both of these loans allow you to turn your home’s equity into cash that you can use on a myriad of items. You can use them to pay off your credit card debt, send the kids to college, make home renovations, paying for accumulated hospital bills or even taking a luxury vacation. The interest on both of these types of loans is generally tax deductible.

A home equity loan works like a traditional loan. The loan amount is secured by your home, just as your primary mortgage is secured. This means that if you were to default on the loan then your home could be foreclosed upon by the lender. These loans, similar to a primary mortgage, can also be financed over a long period of time to allow you to set the payments at a price that is convenient for you.

A home equity line of credit is a revolving line of credit. Similar to a credit card or other personal line of credit, these loans can be used to pay for long-term expenses. You draw out a certain amount and then you pay it off. Then you can draw out more and then pay that off. You don’t find yourself in long-term debt, but you have access to the funds whenever you may require them. Depending on your equity, these loans are excellent for long-term home improvement projects or paying for your child’s college tuition.

Before taking out any loan it is a good idea to shop around and talk to a reputable second mortgage broker. They will discuss your loan options and help you decide which one is best for your personal situation.

List of Recommended Second Mortgage Lenders Online - We maintain a list of recommended mortgage companies online and update the list regularly.

Second Mortgage Lenders For People With Bad Credit - We also maintain a list of mortgage companies online who service borrowers with credit problems.

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Second Mortgage FAQs

By Kristy Annely

What is a second mortgage?

More commonly known as a home-equity loan, a second mortgage is a secured loan that allows homeowners to borrow against the equity of their property. These loans are very useful if you need to do any major repairs to the home or if you need to make add-ons to your home.

How much am I allowed to borrow?

The amount of money you are allowed to borrow is based on the market value of your property minus the balance of your previous mortgage. For example, if your property has a market value of $300,000 and you still owe $200,000 on your first mortgage, you will have a $100,000 equity credit line. You would then be able to borrow up to this amount.

Why would you borrow from your equity?

There will be times when you would need a large amount of money, whether it is for home improvement reasons, buying new appliances or maybe even for medical bills. Getting a home-equity loan is far better than using your credit cards to pay for these things.

Since this type of loan is secured, the interest rates will be much lower than those of credit cards. The interest rates you pay on a second mortgage can also be tax deductible for some people.

What are the payment schedules of the loan?

There are two types of home-equity loans. They differ in terms of payment schedule. The first type is called an open-end loan. This type of loan has a payment schedule of up to 30 years with a variable interest rate. The minimum monthly payment can be as low as the interest due that month.

The other type of loan is called a closed-end loan. This type of loan has a fixed interest rate, and can have an amortized payment schedule of up to 15 years with a three- or five-year balloon payment. When the balloon payment is due, you will then be able to either pay off the balance or refinance.