Types of Real Estate Loans

Second Mortgages

Second mortgages, and third and fourth mortgages for that matter, are mortgages placed on the property after the original 1st mortgage.  Since they have a note and Deed of Trust in line ahead of them should the property go to foreclosure, there is an added element of risk.  Because of this risk, these notes typically have a higher rate than first mortgages.  However, since they can be used in tandem with first mortgages, they can actually help lower the cost of the total loan package, and help you eliminate PMI,( Private Mortgage Insurance)

Some seconds, such as private and sub-prime seconds, are based primarily on equity as security, and will not allow you to exceed 60 or 70% of the homes value.  Other loans, which are primarily based on credit scores, may allow you to borrow up to 125% of your home's value. The higher the percentage of value, the higher the rate.  Credit scores, employment history, and market conditions also are a determining factor. Most HELOCs (Home Equity Lines of Credit) are recorded in second position, and thus are considered 2nd mortgages.


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