Is a 125% mortgage a first mortgage or a second mortgage?

Answer 1

ALWAYS a 2nd. Few banks out there lending 125% of your equity.

there is NO hard-money lenders out there willing to lend over 70% of the equity. Most common is 65% for hard-money lenders for those who don't know. Why they're called hard-money lenders? b/c you almost can't get a loan anywhere but thru them due to having super duper bad credit and other bad credit situation like in bankruptcy, foreclosures, etc. Hard-money lenders are so easy to deal w/ because they pretty much make tons of money of of you by giving you outrageous rate and fees to do your loan.

Answer 2

it's a second mortgage. They were very popular 8 years ago, and now are slowly making a comeback. The only time they really make sense is if you are paying off high interest rate credit cards. You need great credit to qualify for these loans, because no equity, and 2nd position make you a high risk to lenders. The rate you will get is very high but probably not as high as your credit cards.

Answer 3

Could be a hard money loan or a first and a second.

Answer 4

Anything over 100 Percent is a 2 mortgage - Some lenders will do this, but you will need to have a better Credit score than most, and have what a Lender calls Disposable Income -

Here is a article that was written by Gary Foreman of The Dollar Stretcher

The 125% Mortgage

"Reduce your monthly payments! Save money and be back in control of your debts." That's the pitch you hear for second mortgages that allow you to borrow up to 125% of the value of your home. And as more people see their credit card debts creep up, they're wondering if this type of loan could be the answer to their problems. So let's take a look at the 125% second mortgage.

What makes these loans look so attractive? They claim a couple of benefits. First, the interest rate charged is lower than on a credit card account. And rates have trended upward on credit cards. Even with good credit it's not unusual to be paying 15% or more on your credit card balance.

The other lure for borrowers is that the second mortgage comes with a lower monthly payment. They typically run 15 to 30 years. So borrowers are only repaying a little bit of the principal each month. It's not unusual for someone who has credit card balances to reduce their monthly payment by one third if they transfer to a second mortgage.

Finally, potential borrowers are reminded that some or all of the interest expense could be deductible from their federal income taxes. Pretty tough combo to beat, right?

Well, maybe not. Take a good, hard look at what's happening. To begin with, most companies that issue second mortgages will charge you to borrow money. And, they're not bashful about asking for it. For instance, one company offers a rate of 12.25% (13.9% APR). But to get that rate you need to add 10% to the amount borrowed. If you want a lower rate, you'll pay even more.

Let's look at an example. Suppose five years ago you bought a home for $100,000. You put down 10% and took an 8% mortgage. We'll further assume that the home has appreciated and is now worth $110,000.

But lately you've been running up a few credit card debts. Actually, more than just a few. If you add them up it totals about $30,000. So what happens if you use a 125% second mortgage to consolidate those debts?

To start you'll pay a $3,000 premium to borrow $30,000. And if you add the $33,000 in new debt to the balance you still owe on your first mortgage, you now owe $118,500 on a home that's worth $110,000. But that's not much more than the house is worth. Well within the 25% that the mortgage company would lend you. No problem, you think.

On the plus side, you have reduced your payments. Depending on how much interest the credit card companies were charging you could be saving $250 each month in minimum payments. So that's good.

Now for the downside, you're stuck in your home. Forget about moving or refinancing for lower rates. Even assuming that the house appreciates 3% each year, if you continue to make the minimum payments on both mortgages it'll be two years before you owe less than the house is worth.

Selling it is even tougher. Your real estate agent will want a 6% commission. You'll need to make payments for four years to be able to sell it and pay the commission. And you'll walk away with empty pockets. If you'd like a 10% down payment for your next house you can plan on making those payments for six years before you put your house on the market.

And that's if home prices go up. There's no guarantee of that. There have been many times when real estate prices slumped for a few years. In that case you could be stuck in your house forever.

Next, let's look at the amount of interest that you'll pay. Yes, the credit cards do carry a higher rate. But because you pay them off more quickly you only end up paying about half as much in interest expense. On a loan this size you could write checks for an additional $10,000 to the mortgage company over the life of the loan.

There is a way to reduce that. Switch to the second mortgage and continue to make the same monthly payments as before. Instead of making the $354 payment required by the second mortgage, continue to make payments of $600 each month. You'll return to a positive equity position in just 15 months. In about four years you'd be able to sell your house, pay the real estate commission and still have 10% down for your new house.

So what's the bottom line? Second mortgages work best if three conditions are met. First, that the second mortgage doesn't hit you with an overly large origination fee. It's hard to come out ahead when you add 10% to the amount you already owe.

Second, you need to plan on paying off the second mortgage as quickly as possible. If you pay just the required amount each month you'll be giving away a lot of money in interest over the years.

Thirdly, you'll need to have self-discipline. Just because your credit cards show a zero balance doesn't mean that you have extra credit to use. Your new goal should be to pay off the entire account balance each month. Consider anything less to be a failure. Letting your account balances creep up again is the first step to financial disaster.

If all three of these conditions aren't met, a second mortgage is a bad idea, and one that has you borrowing more than the value of your home is especially dangerous. Don't look at this as a way to reduce your monthly payments.

On the flip side, if you can lower your interest rate without paying a large origination fee and will continue to make the same payment every month, a second mortgage can be a way to reduce the cost of your debt.

You'll surely hear more ads encouraging you to consolidate your loans into a second mortgage. And they'll make it sound easy and safe. But, the wise consumer will consider all the possible consequences before signing the contract.

Now if you decide to go with a 125 mortgage, please consider a Mortgage Broker/Banker. #1 a bank will not do a 125 loan, where as a Broker can do one for you. Just be carefull having many ppl pull your credit...

Talk with a broker, a broker underwrites for many company's (I underwrite for 150 companies) so I only have to pull credit 1 time, and they look at my credit. A single lender (not a broker) has programs available, but they may not be able to help you and your situation, so you go elsewhere, and than that person pulls your credit (see what I mean.) If you shop, your credit is pulled and that is considered a soft pull, for a 30 day period. Just like shopping for a auto, it is good for 30 days. If you apply for a credit card, that is considered a "hard" pull and it drags down your credit score. When looking for a home, please do not apply for a credit card, Department Charge Card, Gasoline Card or make any major purchases, like a auto, etc. This will pull your credit down.


Try to find someone (broker) that will pull your credit one time, and submit your loan application to company's that will go off his credit report. By the way, a loan application is called a 1003, and they will issue you a GFE (Good Faith estimate, with-in 3 days, that is per the RESPA laws, and the TIL (Truth in Lending). The GFE will tell you the up-front closing cost associated with your loan. The TIL will tell you the terms, rate associated with your loan. This is a estimate only - not the final - but it does help you figure things out.

Answer 5

2nd mortgage.

And I suggest you STAY AWAY from them unless you're in serious trouble. Then consider something like this as a very last resort!

Answer 6

It is a second.

Answer 7

A second, almost always