2006-06-29 00:02:34 · 5 answers · asked by brandon w 1 in Business & Finance ➔ Personal Finance
Look at it this way. You're taking on another loan because you can't pay off the debt you already have. You will get a worse interest rate because of that. You can pay off the first mortgage, but now you have another one at a higher interest rate than the first one you couldn't pay. Dumb idea.
2006-06-29 07:09:57 · answer #1 · answered by jlamb_2000 2 · 0⤊ 0⤋
A second morgtage cannot pay off a first morgtage. It is just that, " a second morgtage". When you buy a home, a lender, the one you go to for the loan, pays the seller, and you repay the lender plus interest. That is the first morgtage,
At some point after that, let's assume you have good personal credit, and / or you have accumalated equity in your home. Equity is an amount that you have paid on your loan, morgtage, whereby the market resale value of your home exceeds the balance of your morgtage loan.
Let's suppose you then decide to add a room or, pool, etc. The contractor who performs this work may agree to do this on credit for you. At that time, the contractor would place a lien on your home to secure his interest, as you then make payments to him or, a third party such as another finance company which the contractor uses. The contractor or the third party then holds the note to whom you will make payments. This is a second morgtage.
You are now making two payments on your home.
2006-06-29 07:29:10 · answer #2 · answered by ed 7 · 0⤊ 0⤋
Well. Someone was right mentioning you could use your 2nd mortgage for anything...Indeed, at most, you can apply those funds to...anything, including the 1st mortgage.
How does it work. Because it is the 2nd mortgage, it means there will be an additional lien/charge on our house, usually but not always BEHIND (...or in 2nd position) your 1st mortgage.
In order to obtain a 2nd mortgage, one typically has to have some equity in their house because that will determine whether you can or can not even be considered for the 2nd mortgage. Example: Your house is worth 200,000 today. Your current 1st mortgage balance is 100,000. Technically, your equity in the house is 100,000 (200-100). Your existing Loan to Value is 100/200=50%.
With 2nd mortgages, they start calculations (subject to the fact your credit bureau is OK and you are fine and dandy with our payment history...) based on a certain %. They will say something like "we will lend you up to 90% of your house value as a 2nd mortgage...". Sweet! How does it work now?
1. 09 * 200,000 (confirmed value of our house through appraisal)=180,000
2. you then deduct the 1st mrtg from this amt! Why? That's the way it is! So, 180,000-100,000 = 80,000. That's the amt of the 2nd mortgage you should be able to get.
Hope it helps!
2006-06-29 09:57:19 · answer #3 · answered by Elias 2 · 0⤊ 0⤋
Yes you can. Second mortgages can be used for absolutely anything. But I certainly hope you are getting a better rate on your 1st mortgage than you would get on a 2nd mortgage. If so, don't do it.
2006-06-29 09:32:24 · answer #4 · answered by Amanda 3 · 0⤊ 0⤋
Have a look here.
2006-06-29 07:42:56 · answer #5 · answered by Anonymous · 0⤊ 0⤋