Second Mortgage Financing

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Second Mortgage Financing is better known as second mortgage loan, is a special way to provide loans against the same property that has been already used as security against the first or original mortgage. The interest rate for second mortgage is generally much more than the first mortgage.

Second Mortgage Financing helps the borrower to spend this amount on issues that arise after the purchase of property like maintenance of the property, use of the property for business purpose and so on. Second Mortgage Financing also saves the borrower from the hassles of mortgaging another property to a new lender, which becomes difficult on account of the apprehension regarding its repayment.

Second mortgages offer immense scope for economizing the borrower's expenditure by initiating their refinancing. The process of refinancing of second mortgages, serves to reconstitute the basic structure of the second mortgage loan. The fact that the interest rates on refinanced second mortgages are not taxable, facilitates savings by the borrower.

The refinancing facility mainly provides two facilities, first facility is that it helps in identifying the amount of money to be paid for monthly installments and it offers the facility to modify the variable rates of interest into fixed rates of interest.

The second mortgage financing is of two types-

  • Fixed Rate Second Mortgage
  • Variable Rate Second Mortgage
The fixed rate second mortgage is structured at the beginning of the loan term by distributing a specific sum of money as interest over a period of time accompanied by the periodic repayments of the principal amounts. The second mortgages usually like the original mortgages stretch over a substantial period of time.

The Variable rate second mortgage is quite interesting in the way that the borrower is required to payoff a specific sum of money as interest for a specific period of time. After the completion of that time span the rate of interest varies according to the different market indexes.

The second mortgage amount is usually paid off completely at the beginning of the loan period and their withdrawals could be done with the help of debit cards. The refinanced second mortgage rates can be as high as 12.5 % of the value of the collateral.

Second mortgage has been further classified into foreclosure second mortgage, that mainly deals with the procedures that executed after the borrower fails to pay off the amount of second mortgage. The other variations of the second mortgage are bad credit second mortgage and subprime second mortgage.

Last Updated on 5/26/2011