A second mortgage is a lien on properties that are under a mortgage or a more senior loan. Called the position of the lien holder , the second mortgage falls behind the first mortgage. This means the second mortgage is more risky for the lender and thus generally comes with a higher interest rate than the first mortgage. This is because if the loan fails, the first mortgage will be repaid first before the second mortgage. Commercial loans can have lots of loans as long as equities support them.
When refinancing, if the homeowner wants to refinance the first mortgage and keep the second mortgage, the homeowner should ask for the subordination of the second lender to let the lender move first into the position of the first librarian.
The second mortgage can be arranged as a fixed amount that must be repaid within a certain time, called the term home equity. They can also be structured like credit cards that give the borrower the option to make a payment less than the interest charged each month.
Due to lender guidelines, it is rare for conventional loans for property that has a third or fourth mortgage.
In the case of foreclosure, the second lien holder can begin the foreclosure process when the homeowner stops making payments. The second lien holder must meet the balance of the first mortgage before they can collect on the second mortgage balance.
In situations when the property is lost for foreclosure and there is little or no equity, the first lien holder has the option of requesting a less settlement with the second lien holders to release the second mortgage from the title. Once the second lien holders break away from the title, they can come after the homeowner in a civil court to pursue the judgment. At this point, the only option available to homeowners is to accept a decision or file of bankruptcy.
Generally, when considering an application for a second mortgage, the lender will look for the following:
- Significant equity in first mortgage
- The debt to low income ratio
- High credit score
- Work history is solid
Video Second mortgage
Jenis hipotek kedua
The second mortgage comes in various forms, with each type using the house as collateral. A second mortgage is possible because of home equity, which can be accumulated by making advance payments at the time of purchase, through monthly payments, and/or through increasing market value.
Number of paralyzed
Also known as a one time loan and home equity loan, the borrower receives some money from the lender. With this type of loan, the borrower is required to pay off the loan by making a fixed monthly payment. Each payment consists of a portion of the loan balance, together with interest expense. This is similar to the first mortgage.
Maps Second mortgage
Credit line
The line of home equity loans is another type of second mortgage, hereby in the form of the amount of money that has been determined for the borrower to withdraw. With this type of loan, the borrower is not required to take any money, but they have the right to do so on their personal terms. With credit lines, the lender imposes a maximum loan limit, which can be increased as requested by the borrower. Borrowers can borrow and repay credit lines as much as they want.
Usage
The second mortgage can be used for many expenses, at the discretion of the borrower. Some of the most common uses of these loans include:
- Home renovation
- Tuition
- Medical expenses
- Debt consolidation
The lender can ask for information about what the money will be used, but the borrower has the option of making his own decision after securing the funds.
Tax benefits
There are tax benefits from the second mortgage, such as a deduction for the interest paid on the loan. This is not guaranteed and is based on the tax situation of the borrower.
Risk of foreclosure
The second mortgage, just like the first mortgage, uses the house as collateral. With this, when the borrower fails to make the payment, the lender has the right to confiscate the property.
Cost
In much the same way as a purchase loan, there are fees associated with a second mortgage. It varies based on many factors, including the lender and the amount of money borrowed.
- Credit check
- Assessment
- The origination fee
- Interests
No closing costs
Many lenders do not provide the cost of closing the second mortgage, which means that the borrower is not required to bring money to the closing table. With this, closing costs are instead rolled into borrowing costs, which means that borrowers pay money in other ways.
Documentation
Getting a second mortgage is similar to buying a home, with lenders needing a variety of information and documentation to make decisions about the application:
- Pay stubs
- Tax returns
- Bank statement
- Full loan application
- Bad Lending Practices
The second mortgage often presents potential problems that are not typical with conventional home purchases.
- Balloon payment
- Voluntary insurance
- Penalty payment
See also
- House equity loan
- Mortgage Investment Corporation
- Mortgage loan
- Mortgage law
- Refinancing
References
External links
- The Federal Reserve Board Mortgage Comparison Calculator
- [1]
- Second KPR
Source of the article : Wikipedia
0 Comments