What are Second Mortgages

Offering Homeowners Creative Solutions to Their Financial Situations

By taking out a second mortgage on their home, borrowers can turn existing equity into cash to consolidate debt, fund home improvement projects, contribute to an investment home purchase, or build a secondary unit.

 

The second mortgage also offers owners creative solutions to financial problems. We have seen second mortgages (also called “second liens“) used to pay down first mortgages and eliminate mortgage insurance. We have seen owners use a second mortgage to keep a desirable first lien intact while cashing out equity to use for other purposes, such as college tuition.

 

Central Coast Lending is able to lend on an assortment of second lien situations, which can help borrowers consolidate debt, fund home renovations, or take out a new line of credit.  Give us a call at 805.543.LOAN or an email with any questions.

Benefits You’ll Love About Second Mortgages

Pay down first mortgages and eliminate mortgage insurance

Turn existing equity into cash to consolidate debt

Fund home renovations

Contribute to an investment home purchase

Information on Second Mortgages

Below, you will find expandable sections that give you information on Second Mortgages. If you are ready to apply for a loan, click here and it will take you to our secure online application. If you still have questions, our loan officers are just a phone call away (805.543.LOAN)

Background: Explaining Liens and Their Positions

The two main components of any home loan are the “promissory note” and the “deed of trust.”

The promissory note is essentially a contract that contains a pledge to repay the loan amount and the terms for repayment (which includes interest rate, loan term, loan amount, etc).

The deed of trust – also called a “mortgage” or “lien” – states that the home may be used as “collateral” for repayment of the loan; in the event of payment default, the lender is able to foreclose on the property, sell it, and retain the proceeds to satisfy the debt in question.

Every lien has a “position” or “priority.” All home loans have at least one position – “first position.” The lender in first position gets the first crack at recouping its losses in the event of payment default.

It is possible for borrowers to take out additional liens (mortgages) on a home. All subsequent liens are “subordinate“, which means that the lender in secondary position must wait to be made whole until after the first is finished. You might also see this referred to as a “second lien“, a “second mortgage“, or a loan in “junior position.”

Home Equity Line Of Credit (HELOC)

The HELOC is a revolving line of credit that allows homeowners to turn home equity into cash for ready use. Some of the best uses of a HELOC allow borrowers to free up cash for debt consolidation (credit cards, car, student loans) and home improvements.

 

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Articles and Updates

  • Home Equity Line of Credit (HELOC) explained. (Read More)
  • The closed-end second lien explained. (Read More)

 

Further Reading (from the FAQ Page)

  • Low down payment loan programs (Read more)
  • Gift giving guidelines (Read more)
  • Mortgage insurance guidelines (Read more)
  • Credit qualification standards: FICO and Debt-to-Income (Read more)

Background: Structures of Second Liens

Subordinate financing can be structured in two ways:

 

1) The Piggy-Back (a.k.a.: Concurrent Lien, First and Second Combo)
Borrowers purchasing a home, are able to use a “piggy-back” their first mortgage in with a second mortgage to give them additional flexibility in the formation of their repayment plan.

2) The Standalone Second
Borrowers can also take out a second lien independent from the first. In doing so, the borrower can take cash out of their equity to use for other purposes while preserving their first lien.

Close-End Second

The closed-end second lien sets a fixed interest rate and a specific payment schedule. This format offers security for borrowers with a plan that they can reliably execute.

 

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Step 1. Get Pre-Approved.

Getting pre-approved is as easy as 1-2-3!

Create an Account

Creating an account is fast, easy, secure and FREE! Your account enables you to easily modify your loan application and view the status of your loan anytime day or night.

Submit Information

When you register for a Loan Center account, you can submit a loan application online and the sensitive information that you provide will be transmitted securely.

Get Pre-Approval

Pre approval can be done in as little as an hour if you have thoroughly completed the loan application and have all the needed paperwork to support the information on the application.

You have questions? We have answers.
Call Now:
805-543-LOAN

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