Second Mortgage Loan Details

     A mortgage is a legal document stating a secured interest in real property. A second mortgage refers to a mortgage of second priority in the event of foreclosure or sale of the property—that is a mortgage where the lender can attempt collection only after the rights of the first mortgage holder are fully satisfied. Essentially among the secured lenders the second mortgage holder stands behind the first mortgage holder and any liens (claims) filed against the property prior to the filing the second mortgage, but before any additional mortgages or liens filed against the property subsequent to the filing of the second mortgage. Second mortgages are generally used by consumers to ‘take cash out’ of a home or other piece of real estate through a home equity loan. Another major use of second mortgages is as contingent collateral to secure business and other non-real estate related debts. That is a lender may request a second (or even a third or fourth mortgage) from an individual to whom they are about to make a large loan even though that mortgage has no real value at the present time. For example, a lender making a basically non-secured loan to a business or to a consumer for non-real estate purposes (an auto loan for example) will commonly request that they be granted a second mortgage against real estate even the consumer presently has no equity in the real property. In this case the lender is using equity that subsequently accrues (from principal payments on the first mortgage and from the rising value of the property over time) as collateral against default on the contingent loan. These types of mortgages generally provide that they will be released after certain conditions are met regarding the underlying loan (such as 2 years of on time payments, etc.).

Do not make assumptions. If you are unsure about anything...
ASK YOUR MORTGAGE COMPANY QUESTIONS!

1. Inquire about all fees and costs associated with this loan, including the second mortgage interest rate and APR (annual percentage rate).

As with any residential mortgage loan....

2. Do not assume that the mortgage interest of this loan will be tax deductible. Consult a qualified tax advisor for potential tax benefits.
3. Be sure to ask if there is a pre-payment penalty (prohibited by law in certain states) for paying off the loan too early or making substantially large payments against the principal.