A second mortgage on a property is literally a secured loan. This is another method of raising capital if the properties value has increased.
© 2008 Michael J Alexander
Your home may be repossessed if you do not keep up repayments on your mortgage. Written quotations compliant with the Mortgage Conduct of Business (MCOB).
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Second mortgage
A second mortgage is taking out a mortgage on a property which is already mortgaged. This can be used to raise capital if the property has significantly increased in its value and would involve finance companies rather than building societies or banks. Since the first mortgagee (lender) usually holds the deeds of the property, the second mortgagee will carry a higher risk and thus charges a considerably higher rate of interest.
Definition of a second mortgage
A second mortgage is a secured loan (or mortgage) that is subordinate to another loan against the same property. More specifically, the second loan in sequence.
In real estate industry, a property can have many different loans against it. The loan which is registered with county or city registry first is called the first mortgage. The loan registered second is called the second mortgage. A property can have a third or even fourth mortgage, but those are alot rarer.
Second mortgages are called subordinate because, if the loan goes into default, the first mortgage gets paid off first before the second mortgage gets any money. Thus, second mortgages are riskier for the lender, who generally charges a higher interest rate.
If you have a second mortgage on your property and need advice then we can help. We can also assist if you are looking to place a second mortgage on your property.
Simply give us a call on 0845 2 605 506 or fill out our enquiry form.
Length of a second mortgage
Some second mortgage loans can extend for as long as 10 or 20 years, others may require repayment in just one year. You will need to discuss the repayment terms with your lender or the individual mortgage company and select one that offers terms that best suit your needs. Lets say you need to borrow £20,000 to make repairs on your home, you may not want a loan that requires you to repay the entire amount in one or two years because it could end up making the monthly payments too high.
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