I understand a home equity mortgage. Can anyone explain how a second mortgage works?
Posted in Credit on 04/06/2010 02:56 pm by admin
babygrldog asked:
Is the higher rate of interest charged by the lender the only reason for them to do a second mortgage?Why would the lenders lend more money than the property is appraised for?
MICHEL
Is the higher rate of interest charged by the lender the only reason for them to do a second mortgage?Why would the lenders lend more money than the property is appraised for?
MICHEL
04/08/2010 at 2:43 am
CASEY
A second mortgage is a secured loan (or mortgage) that is subordinate to another loan against the same property. More specifically, 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 rarer.
Second mortgages are called subordinate because, if the loan goes into default, the first mortgage gets paid off first before the second mortgage gets any money. Thus, second mortgages are riskier for the lender, who generally charges a higher interest rate.
04/09/2010 at 1:51 pm
EDGAR
They are basically the same thing.
A home equity loan is a second mortgage. It is tied to the house and is a debt.
There are two types of second mortgages:
Home Equity Line of Credit
Closed End Second
The difference is that the HELOC is an adjustable rate associated with the PRIME rate, set by the Federal Reserve.
The closed end second is a fixed rate, it will never change.
Hope that helps.
04/12/2010 at 12:04 am
GUSTAVO
I have come across a website ie
The articles and links therein are useful.
04/14/2010 at 4:23 am
WILFREDO
A second mortgage is a home equity mortgage. It does have a higher APR and usually changes when the prime changes. However, you can also get one that has a locked interest rate. Alot of times people get a 2nd mortgage as an interest only, which is only a good idea, if you intend to sell the home within a few years or refinance.