What is the difference between a mortgage and a second mortgage?
Friday, 27. August 2010
and where can I find detailed information about both and their differences?
Easy Home Equity Loan
Home Equity Loan Information
Friday, 27. August 2010
and where can I find detailed information about both and their differences?
Quicken Loans Says:
They have the same purpose – to finance your home.
They are numbered in terms of who is owed first – the first mortgage gets their money before a second mortgage would.
Usually, the first mortgage will finance up to 80% of the home’s value and the second will finance the remainder (up to 100%) This is done to avoid private mortgage insurance (PMI).
Typically, second mortgages are higher risk and because of that, they have higher and/or variable interest rates.
Hope that helps!
happygirl Says:
A second mortgage uses the equity in your house for secerity the loan will be paid back. You then have 2 mortgages your first and your second. Unfortunatly 2 payments as well..
Tapestry6 Says:
First mortgage is for the total amount on the home you are living in.. as you pay down the loan, or the value of the home you bought goes up in price, you have something called equity. Equity says your house is worth a certain dollar amount, if the value of your house is higher you can go to another bank and basically sell them part of your house through a loan from them.
People like using mortgage loans to pay bills because the interest rates are single digit so they can do house repairs or pay off higher interest credit cards. Also with a 2nd, you can take the interest off that you paid on your income tax each year. You can’t do that with credit card interest.
Ron Says:
There is much to learn and the wise homebuyer will be the one with the most information.
Jeromy W Says:
They both do the same thing, place a lien against your property that has to be repaid. A primary or first mortgage, gets you into the home and depending on the loan program and downpayment, can have a significant impact on how and if you qualify for a second or home equity mortgage. there are various and numerous programs for both. For second mortgages there are typically two types of programs, a heloc, or line of credit and a home equity loan. Both let you borrow against the equity in your home. A loan is just what is sounds like, they are fixed rate product, and you have a monthly payment, most amotarization schedules run between 10-20 years, most lenders don’t do 30 year. A line of credit basically works like a credit card that is secured against you home. You access it when you need to. Most lenders now have a segment or lock in feature that will allow you lock in the rate for a draw you take. If you need to access 10k from your heloc, you call the lender and lock in the rate. This is important as helocs are variable rate products that adjust monthly can have high margins or hits in addition to the monthly rate. Your rate can be 5.5% but if your margin is 2%, your true rate is 7.5%. Say your home is worth 300k. your have a first mortgage of 200k. You would qualify for a home equity loan of about 40k as this would put your loan to value at 80% (240,000/300,000). Now some lenders may allow you to go above 80% but you’ll pay for it in much higher rates if you get it at all. Most lenders are either pulling back on home equities and or tightening underwriting standars that is making it very difficult to obain a home equity right now. Home equities can also hurt your credit score as well, especially heloc’s. Again, your home is worth 300k, but you only owe 100k on the first mortgage and you now get approved for a 140k home equity. While you may not access the line of credit, the reporting agencies actually ding you as you have access to 140k. There are other differences, you cannot escrow or have the lender pay taxes and insurance with a home equity, most lenders do not require title insurance on home equities over a certain loan amount. The interest paid on a home equity is tax deductible. Generally, home equities are not a great idea, they are intended to be short term solutions to get you out of a jam, ie, roof needs repair, they are not intended for people to spend over their means and to be honest, that’s what they have been used for lately and it’s part of the reason why we’re in the housing crisis we’re in. Like all mortgage products, home equities have their place, but one needs to tread carefully, hope this helps
d_cassidy76 Says:
At times in life it may be necessary to come up with a sum of cash for unexpected expenses or even expenses that you might not be able to afford without a influx of cash. In these cases a second mortgage can come in quite handy. Before taking out a second mortgage, however, you should know how they work and the advantages and disadvantages of second mortgages.
Basically a second mortgage occurs when you take out another mortgage on top of the existing mortgage on your home. This type of loan is secured with the property for collateral. Of course, the first mortgage takes precedence in the event that you default on the loan. Any funds that are left would then be applied to the second mortgage.
Many people commonly use second mortgages for such expenses as home improvements, the purchase of a second or vacation home and to consolidate other debts with a lower interest rate. Of course, you may also be able to use the proceeds of your second mortgage for other options but you should always keep in mind that you are putting your home at risk for the purchase and be sure you can justify the risk for that purpose.