What is the second mortgage?
The second mortgage is an additional mortgage for the property, which is extended to the owner when the property already carries the first mortgage. The second mortgages are often extended by the same creditor who gave the first mortgage. However, the second mortgage can be obtained from another creditor. In the event that the debtor does not meet the schedule of payments for both mortgages, the creditor who holds the primary mortgage will receive the payment from the closure and sale of the property first. The second mortgage holder can claim the remaining revenues.
When the house owner decides to engage the second mortgage, the creditor usually consider the current outstanding amount of the first mortgage, the current market value of the property and the applicant's rating. After evaluating these factors, the creditor informs the debtor about the amount of funds that can be secured with the second mortgage. This number may be more or less than the Hopes debtor to receive from the transaction. As soon as the creditor informs the homeowner of the loan amount and the interest rate that applies to, he / she can determine whetherwill continue with the request.
In most cases, the second mortgage will carry a higher interest rate than the first mortgage. The reason is that the creditor causes a higher degree of risk, although the financial situation of the house owner is very stable. An increased risk to creditors does not mean lack of credit value by the applicant. However, the interest rate acknowledges that in the event of a failure, the holder of the second mortgage would not be able to require any funds from the sale of the property until the first mortgage was resolved.
Together with a higher interest rate, the second mortgage is usually written for a shorter period than the first mortgage. Often, this second property loan is discarded to repair or improve the property and is significantly less than the amount of the first mortgage. In these circumstances, the owner of the house is expected to pay the amount of mortgage plus a valid interest for a shorter period.