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Second Mortgages
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A mortgage that has a second position to the first mortgage. Also known as subordinate financing.A second mortgage can be a one time loan or a line of credit.
Second mortgages are a bigger risk to a lender as opposed to first mortgages. A first mortgage is in the first lien position which means it has priority over any other mortgages and/or liens. A Second mortgage is in the second lien position which means that the first mortgage has priority over it. For example if a consumer was to default on his home loan and the home was foreclosed upon and sold via sheriff's sale, the first mortgage would be paid out of the proceeds of the sale first and if there was anything left over then the second mortgage would be paid with the remainder. Therefore, you can see the second mortgage lender has more risk involved when they provide this loan for you. This is the main reason as to why second mortgage rates are almost always considerably higher than first mortgage rates.
Obtaining a second mortgage can benefit you when purchasing a home if you do not have the required 20% down to avoid mortgage insurance.
Second mortgages are often used to eliminate PMI requirements on conventional loans. This benefits the borrower because often there payments are lower than with PMI. They also benefit because intereset on mortgages are tax deductible while PMI is not.
Some second mortgage loans may extend for as long as 15 or 20 years; others may require repayment in one year. If you have a fixed rate second mortgage, the interest rate is set for the life of the loan. However, many companies offer variable rate second mortgages, also known as adjustable rate mortgages or ARMs.
Many second loans are 30/15 loans. This means that the loan is amortized over 30 years, but there is a balloon payment after 15 years. Most people wont have the loan for the full 15 years, but if you did you would have to pay the loan in full at that time.
Second Mortgages in the News:
| Frank to Banks: Write Down Second Mortgages (Financial Planning.com) |
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House Financial Services Chairman Barney Frank urged four of the nation s top banks to adopt principal writedowns on second-lien mortgages to allow borrowers to keep their homes.
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| Rates on 30-year fixed mortgages fall to 4.95 percent, weeks before Fed exit (Minneapolis-St. Paul Star Tribune) |
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WASHINGTON - Mortgage rates held below the 5 percent threshold for the second straight week, a report said Thursday, weeks before a government program that has been keeping rates low is scheduled to expire.
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| Mortgage Rates on 30-Year U.S. Loans Fall to 4.95% (Update2) (Bloomberg) |
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March 11 (Bloomberg) -- Mortgage rates in the U.S. declined for a second consecutive week as the number of home-loan applications rose. The rate for 30-year fixed mortgages fell to 4.95 percent for the week ended today from 4.97 percent, Freddie Mac said in a statement.
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| What mortgage can I get on a rental home? (Guardian Unlimited) |
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Q I am considering buying a second home to rent out as a medium- to long-term investment. I have a £50,000 deposit and do not have a mortgage on my own home. I am looking for a loan of £80,000 for the second property. Am I restricted to buy-to-let mortgages only, or can I utilise other mortgage products which may have better rates to meet my requirements? RE A No you are not restricted to buy-to ...
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| Bank of Nova Scotia Profit Rises on Mortgages (Update3) (Bloomberg) |
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March 9 (Bloomberg) -- Bank of Nova Scotia , Canada’s third- largest lender, said profit climbed 17 percent as higher deposits and mortgages led to record earnings at its domestic consumer bank.
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