What is a second mortgage? |
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Answer:
A second mortgage is exactly as it sounds. Click here for a free Second Mortgage Rate Quote. A second mortgage is a mortgage that is below or subordinate to your first mortgage. Your first mortgage, or the mortgage you applied for when purchasing your home is paid off first if you default on your loan. For example, you purchased your home last year. When you purchased it you took out a 30 year fixed mortgage as your home loan. Present day, you hear that taking out a second mortgage is beneficial. A second mortgage which is piggy backed to your conventional mortgage. A second mortgage could be a Home Equity Loan which is a loan that is taken on the equity you own in your home and is usually only possible if you put a down payment on the home. Either you build equity over time or you put money down and you can then apply for a second mortgage. A second mortgage can be a conventional fixed loan as well. You can take out a Home Equity Line of Credit or a HELOC as a second mortgage as well. Second mortgages are beneficial in that it can remove PMI from your mortgage payment. PMI or Private Mortgage Insurance is insurance that is used to cover the mortgage in case you default on the home loan. An 80/20 Mortgage is where you pay for 80% of your home with a conventional fixed mortgage and the remaining 20% with a second mortgage. The 20% is usually a Home Equity Line of Credit which can be borrowed against. So not only do you have a line of credit at the onset of your home purchase but you are also eliminating the PMI charge on the mortgage. So the savings associated with second mortgages are beneficial. Trackback(0)
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