Welcome to Mortgage Guide
Home Mortgage Loans Article
. For a permanent link to this article, or to bookmark it for further reading, click here.
Why Some People Take Out a Second Mortgage
from: Mortage & Debt FactsThe term “second mortgage” is easier to understand than home equity loan, but they are essentially the same.
A second mortgage is any new loan, beyond the primary mortgage, taken out holding the home as the collateral for the loan. While, you can use a home equity loan to get money out of your home while still living in it, there are also other uses for second mortgages that are not tied to a home equity loan.
There are different situations and times when people may try to get a second mortgage to save money or to tap money in equity.
Two Mortgages at Closing
Some people took out second mortgages during the closing of their first mortgage as a piggyback mortgage. This allowed them to put down the needed 20% as a down payment and avoid private mortgage insurance (PMI) costs.
This works out well for buyers who have this type of access to credit but are low on down payment funds. If they only had 5 or 10% to put down, the PMI would automatically be triggered and added to their monthly payment.
However, if they took out two loans and used the second to bring down the primary mortgage’s loan-to-value ratio then they wouldn’t have to pay PMI.
The difference in monthly payment is not that significant using this strategy, but there are other paybacks – including the ability to deduct the second mortgage’s payments from your taxes, in some cases.
PMI, on the other hand, gives you no such tax benefits. Equity also accrues faster by taking out two mortgages upon closing to satisfy the PMI requirements.
The problem with this approach is that lenders are becoming wary of allowing someone to immediately take out a piggyback mortgage to bring up the loan-to-value ration of the first mortgage. If the home approaches foreclosure, the second mortgagee holder finds themselves in the position of absorbing a loss or having to buy the primary mortgage to get something out of the foreclosure on the piggyback mortgage. So, this type of financial two-step may end up being harder and harder to get approved by lenders.
Home Equity Loan
The other type of second mortgage strategy is to get a home equity loan after closing. This can be done any time, as long as the value of your home and your equity in it is enough to support the loan.
There are risks for the borrower as the home is being used as collateral. If the home equity loan terms are not satisfied or payments are not made, the lender can foreclose even though it is not the primary mortgage. So, this type of financial tool should be taken on only after carefully reviewing the risks and benefits of a home equity loan.
Home Mortgage Loans Specific links
Home Mortgage Loans News
Freddie Mac: 30-year mortgage rate down a tick at 3.78% - Los Angeles Times
 OregonLive.com | Freddie Mac: 30-year mortgage rate down a tick at 3.78% Los Angeles Times The typical rate on a 15-year fixed loan held steady at 3.04%. Sales of new homes were rising in a recent survey, with the low rates helping to make housing more affordable. But many homeowners are trapped in homes worth less than their mortgages, ... US 30-Year Mortgage Rate Falls to Record 3.78 Pct. Mortgage Rates for 30-Year US Loans Fall to a Record-Low 3.78% |
Mortgage Closing Overcharge Suits Curbed by High Court - Bloomberg
 KLEW | Mortgage Closing Overcharge Suits Curbed by High Court Bloomberg The US Supreme Court limited the ability of home buyers to sue mortgage lenders for overcharges at settlement in a victory for the real-estate and banking industries. The justices unanimously threw out a suit by a group of Louisiana consumers against ... US top court limits reach of 1974 real estate law Court: Families cannot sue over loan discount fee Supreme court limits reach of 1974 real estate law |
Despite Home Value Gains, Underwater Homeowners Owe $1.2 Trillion More than ... - MarketWatch (press release)
 Los Angeles Times | Despite Home Value Gains, Underwater Homeowners Owe $1.2 Trillion More than ... MarketWatch (press release) That is nearly one-third (31.4 percent) of US homeowners with mortgages, compared to 31.1 percent in the fourth quarter of 2011. - Foreclosure is not imminent for most underwater homeowners. Nine out of 10 continue to make their mortgage and home loan ... Most Underwater Homeowners Still Paying Mortgages Negative equity remains a drag on housing market Negative Equity More Widespread Than Previously Thought, Report Says |
Bank of America's Interactive Home Loan Planner Shines Light on the Mortgage ... - MarketWatch (press release)
 PR Web (press release) | Bank of America's Interactive Home Loan Planner Shines Light on the Mortgage ... MarketWatch (press release) CALABASAS, Calif., May 24, 2012 (BUSINESS WIRE) -- Bank of America announced the launch of its online Home Loan Planner, an interactive tool created to help customers better understand the home loan process. An integral part of the company's ... Fantastic Home Loans Mortgage Rates in New Zealand How to reduce mortgage interest payments Are We Facing a Student Loan Bubble? |
Kirby McInerney LLP Investigating Potential Class Action Claims Against ... - MarketWatch (press release)
Kirby McInerney LLP Investigating Potential Class Action Claims Against ... MarketWatch (press release) To protect the lender's interest in secured property, mortgage loan contracts require the borrower to maintain specified levels of hazard insurance. If the borrower's coverage lapses, the lender is entitled to purchase coverage for the home, ... |