Should You Take on a Second Mortgage?

Second mortgages are supplemental mortgages on property and real estate that are afforded to an individual in tandem with a preexisting mortgage. Although not a definitive process, it is most common for a second mortgage to be made available by the mortgage lender in ownership of the initial mortgage.

In the event in which the individual who is in possession of both a mortgage and a second mortgage is unable to satisfy payments for any of the mortgages, the mortgage lender who has ownership of the primary mortgage is considered to be the first priority with regard to repayment. Subsequent to the satisfaction of the primary mortgage, the owner of the second mortgage loan is entitled to any remaining assets in order to satisfy outstanding payment.

Applying for a Second Mortgage

Upon an individual’s decision to apply for a second mortgage, the mortgage lender will, perform an analysis of the current state of that individual’s financial affairs with regard to the primary mortgage, which can include the current real estate market value of the property in question, the applicant’s credit rating, and any other outstanding financial matters.
Subsequent to the evaluation of these details, the second mortgage lender will present a financial statement in regards to the rate amount of the second mortgage. In many cases, individuals who have been approved for a second mortgage loan have proved that they are capable – in the fullest extent – to illustrate good faith in the satisfaction of a mortgage loan; credit scores and outstanding debts are instrumental in the approval process for a second mortgage.

Second Mortgage Interest Rates

Akin to a self-certified mortgage, it is not uncommon for a second mortgage to carry with interest rates that exceed those of traditional, standard mortgages. The reasoning for this is rooted in the innate risk concerning the second mortgage lender.

Due to the fact that second mortgages are mortgage loans that exist in tandem with preexisting loans, they carry with them secured risk in the satisfaction of that loan. As a result, mortgage lenders impose increased interest rates in order to solidify their respective institution’s protection from default of payment.

• In addition to a higher interest rate, a second mortgage loan is normally constructed to exist in a shorter term that the initial mortgage loan.

• The monies accrued from a second mortgage can be used for a multitude of purposes, but the intent must be disclosed to the second mortgage lender; in most cases, these monies are invested into home improvements and modifications

Second Mortgage Legality

The parameters and protocols surrounding both the application and approval process of a second mortgage vary on an individual basis and in conjunction with the borrower’s respective state of affairs; all second mortgageforms should be completed to the fullest extent in a meticulous fashion.
In the event that an individual experiences difficulty completing – or understanding – the requirements of asecond mortgage, they are encouraged to consult an attorney specializing in real estate, property, finance, debt, collections, and contracts.