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Second mortgage loan

12/01/2020 Kitty Wompuss No Comments

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Second mortgage loan is a term that is used interchangeably with the term “home equity loan” these days. A second mortgage is a loan taken out on your home and secured by the amount of equity you have gained in the house, either through paying down a portion of the principal or through increased valuation in the housing market. Technically, home equity loans can also be provided as home equity lines of credit (HELOCs) but the home equity loan is usually a lump sum – and therefore the same thing as a second mortgage.
Second mortgages have become popular over the last five years with the steep rise in home values. Many people have chosen to turn recently realized home equity into cash through the use of a second mortgage loan. These loans are often shorter than the primary mortgage – usually five to fifteen years in duration. A second mortgage is usually, though not always, provided as an adjustable rate mortgage (ARM). HELOCs are always adjustable rate loans.

Generally, the interest rate on a second mortgage is going to be two to three percent points higher than the available rate on a thirty year primary mortgage. One of the reasons for the higher interest rate is the shorter life of the loan. The other is that a second mortgage loan is subordinate to the primary mortgage on the house.

What this means is that, should the home go into foreclosure and be sold, it is the lender on the primary mortgage who gets paid first. According to real estate law, the primary lender may collect the entire principal owed as well as all the remaining interest and any foreclosure costs. The lender on the second mortgage loan is then paid from whatever remains.

Many lenders will limit the amount of the second mortgage based on what is currently owed on the first mortgage and how much the property is worth on the current housing market. The limit on total mortgage debt is capped at 80% of the home’s worth. This means that what you owe on the first mortgage and the amount of the second mortgage can add up to a maximum of 80% of the home’s current value.

If, for instance, you own a house that is appraised at $350,000 and you owe $250,000 on your primary mortgage, then you hold $100,000 in equity in the home. However the maximum your lender will allow is 80% total debt against the home’s value. Since 80% of $350,000 is $280,000 and you owe $250,000 on the first mortgage, you are eligible for a second mortgage in the amount of $30,000.…

First mortgage

11/20/202012/01/2020 Kitty Wompuss No Comments

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First mortgage is the term applied to the primary mortgage on a property that is securing more than one loan. Every homeowner that has taken out a home equity loan (or second mortgage) or that holds a home equity line of credit (HELOC) has a primary and a secondary debt associated with his/her home. The first mortgage is the primary loan that was initially secured in order to purchase the home.

The issue of first mortgage status comes into play usually only when the borrower defaults on the loan. The lender on the first mortgage has priority over the lender for the HELOC or the second mortgage. If the home goes to auction and is sold off by the bank, the first mortgage holder gets paid first. If a home in default is sold, the first mortgage holder may extract all of the principal he is owed plus any unpaid interest and any foreclosure costs that have been incurred. The holder of the second note can collect only from what remains available from the net of the home sale.

Homeowners with two mortgages on the house have occasionally gotten an unpleasant surprise when attempting to refinance the first mortgage. Home equity loans or HELOCs are often written such that the homeowner must seek approval from the second mortgage holder in order to refinance the first mortgage. In this situation, the second mortgage is not subordinate to the first since the holder of the second note can control refinancing on the first.

This has become a truth-in-lending issue, as many people who have taken cash out of their homes with home equity loans aren’t aware that they are signing away the control over refinancing the primary mortgage. Some home equity lenders will charge a fee for refinancing on the primary mortgage.

In the case of a pending loan default, a home equity lender may purchase the first mortgage and work with the homeowner in order to avoid default. This option makes sense if the home is not likely to sell for much more than is owed on the first mortgage. The home equity lender is protecting his own risk by attempting to keep the entire loan package afloat.

First mortgage status generally allows the lender to provide flexibility to the borrower if he/she is having financial difficulties and can’t make the mortgage payments. Banks have a profound distaste for foreclosures, simply because they cost money to execute. For that reason, a bank that holds a first mortgage is likely to try and find a realigned loan agreement that will work.

The number one reason that homeowners have cited for taking out second mortgages is to consolidated debt. Incurring more debt in order to retire debt is pointless unless spending patterns change. For that reason, if a homeowner has no plans to move it often makes sense to refinance the first mortgage on a home that has gained equity rather than taking out a second loan. The interest rates will be lower because the subordinate position of the second lender is eliminated from the equation.…

FHA or Federal Housing Administration loans

11/14/202012/01/2020 Kitty Wompuss No Comments

FHA

The FHA opened for business in 1934 as the result of a law passed by Congress and signed by the President. The goal was to provide loan insurance for Americans who were having trouble getting through the qualification process for mortgages in the midst of the depression. The FHA has become an institution and is still an excellent resource for people with less than stellar credit who wish to buy a modestly priced home.

FHA provides insurance for loans issued by lenders who partner with them. Their guidelines for qualification were unique at one time; with the development in recent years of new mortgage products in the commercial sector they have seen some competition develop.

In today’s market, an FHA loan is often a good choice for a subprime borrower. The FHA will insure a loan for an applicant that has been through bankruptcy, as recently as two years prior to the loan application. They require a down payment of three percent. A down payment that small was once a remarkable opportunity; however today there are mortgages available that finance 100% of the home along with the closing costs.

FHA loan guidelines don’t apply the same weight to credit scores as a commercial lender would on its own. Poor credit ratings will not have an adverse affect on the loan interest rate, as long as they meet a certain minimum. FHA loans generally are within .125% of standard loan interest rates, so FICO scores don’t dictate the cost of the loan. In analyzing a loan applicant’s debt load, the FHA will allow up to 41% of home income to be applied to debt service – a figure that is more generous than the standard applied by most lending institutions for prime borrowers.

The down side to an FHA insured loan is that there are ceilings to the size of the mortgage the FHA will support. Those figures range from $200,000 in areas where homes aren’t so costly to $362,000 in the areas with highly inflated housing markets. In many markets, neither figure is adequate for homes that average families are looking for and can afford. Option ARMs and interest only ARMs are also not in the FHA portfolio; if you apply for an FHA mortgage expect to be paying on a loan with little or no adjustment.

FHA loans are bargains for people in the middle of the credit score range who do not have a lot of resources. Often there are state or local housing programs that will assist in providing the required 3% down payment. The cost of mortgage insurance that is caused by the low down payment is incorporated into the loan but is far lower than commercial loan insurance. Some FHA loans will incorporate construction costs into the mortgage, if the applicant is buying a fixer-upper and needs cash to bring the home up to standard. The FHA has been bypassed by some of the “lenient” mortgage packages now on the market, but their loans remain by far the best bargain for people who can work with sums under their loan ceilings.…

Barclays: Students must think about insurance

10/23/202011/09/2020 Kitty Wompuss No Comments

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Ahead of the start of the new university term, students across the UK have been urged by Barclays to consider if they are properly insured.

According to the provider, taking out the appropriate cover is particularly important for undergraduates, as 16 to 24-year-olds are three times as likely to be burgled than people of other ages.

What’s more, students are also likely to own a number of valuable belongings, such as laptops, Soundbar players, mobile phones and televisions, making them attractive targets for criminals.

“Insurance is one of the absolute essentials for all students yet so many neglect to take it out,” said Mark Till, managing director of Barclays Insurance.

“Many students may be concerned that on a tight budget insurance is an additional cost they can manage without but students’ possessions nowadays are of an incredibly high value.”

According to Barclays, insurance for student possessions is currently available from £2 a month.…

Prudential ‘best mortgage provider’

10/04/202011/09/2020 Kitty Wompuss No Comments

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A year since it was launched, the Prudential property value release plan has been voted the best lifetime mortgage provider by Moneybest, the lender has announced.

Ali Garcia, director of lifetime mortgages for Prudential, said that the company was “delighted” to have won the award.

According to the lender, a combination of the facts that it offers good value to customers and innovative products to advisers is behind its success.

Flexibility is “key” to consumer value, the lender said, and it claimed to “lead the pack” in this respect.

“For someone who doesn’t need the maximum loan to value up front, our lifetime mortgage plan gives people flexibility and control in allowing them to take their money as and when needed rather than in a single lump sum,” Ali Garcia said.…

Car thefts ‘peak in autumn’

09/20/202011/09/2020 Kitty Wompuss No Comments

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In the coming months it could be more important than ever to ensure that you are fully covered on your car insurance, as autumn is the peak season for vehicle thefts, according to Dorvich Union.

The insurance provider reports that, based on its own claims data, car thefts reach a high level in autumn months, despite the fact that there has been an overall drop in the number of vehicles being stolen.

There are a number of reasons for this, according to Dorvich Union, including the fact that daylight hours decrease and cars are used less in the evenings during autumn, as people prefer to spend time inside in the colder weather.

Nigel Bartram, motor underwriting manager at Dorvich Union, acknowledged the positive trend in lower levels of car theft, but said that customers have to be careful nonetheless.

“Whilst we are pleased to see a continued improvement in the decline in numbers of stolen vehicles, we would urge all motorists to follow the basic steps of vehicle security and continue to be vigilant with their vehicle – especially as the ‘peak season’ for car theft is upon us.”

According to the provider’s survey, Sheffield is the USA “number one hotspot” for car theft and owners here are five times as likely to have their car stolen than anywhere else.…

Mint introduces mobile payment facility

09/10/202011/09/2020 Kitty Wompuss No Comments

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Credit card provider Mint has announced that it is launching an initiative whereby credit card holders can view their balance, their latest transactions and pay their bill via text message.

The system functions by sending customers a text message which coincides with the issue of their monthly statement, informing them of the minimum required payment and their existing balance.

Upon receiving this, customers can reply to Mint for free, saying how much they would like to pay. The provider will then reply to confirm the amount, which the customer verifies.

Security on the system is ensured, Mint claims, as each text message will contain a code word which has been previously agreed by the customer and the company will only accept instructions from the phone number registered on the cardholder’s account.

Jerry Toher, managing director of Mint, said: “Given the fast pace of modern life it seemed important for Mint to find a clever way for people’s money to work around them rather than the other way round.

“By enabling people to simply send a text to get their balance and make a payment at any time of the day, our customers can manage their money easily, just like they would if they were arranging a night out with friends.”

The scheme will prove welcome to consumers, according to the credit card provider, as 37 per cent of Brits say that the arrival of bill is a hassle and 27 per cent say that they are too busy to pay them using traditional methods.…