Home Equity Loans – second mortgage

Question by Simon W: Can you get a second mortgage for half of the equity on your house?
So that your second payment will be based on a 30 year fixed rate rather than a refi. Will it be a smart thing to do. When you sell out you tin pay the second mortgage with the first and still walk with remainder of equity. Is this legal and does it make since.

Best answer:

Answer by girlwhoknowsitstrue
Use real numbers to understand.Your house is worth $ 100k.First mortgage is for $ 50k.Equity = $ 50kSecond mortgage = $ 25k (half of equity).If you got a 30 year second mortgage, you have to pay off your first and your 2d mortgage. Your overall payments will be higher than if you just had a $ 75k 30 year fixed. You can’t “pay” your second mortgage with the first, you have to pay them both.When you sell, you get the sales price – first mortgage – 2d mortgage, which right now would be $ 25k.Many lenders will not extend a 30 year second mortgage, because it’s secondary to the first – which means that if you go bankrupt, first mortgagee gets paid off first, second mortgagee gets what’s left – and often times, it isn’t enough to cover the debt – that’s why 2nd mortgages are generally 5 years or less.

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