A person who has taken loan against his property and is unable to pay the loan back that is the primary loan or first mortgage loan don’t be hopeless so you have an option of 2nd mortgage loan against the same property. 2nd mortgage loan is called secondary loan because if the loan goes into default, the first mortgage gets paid off first before the second mortgage. 2nd mortgage option is for worst case. This option can be used in case of bankruptcy or loan default then in that case a person can choose this option in order to get rid of the lenders and tensions.
Introduction
The science behind 2nd mortgage is very simple. The person who pays you primary loan or first loan against this property on which you are taking secondary loan will get his money back from sale of your property and 2nd mortgager gets whatever would be left over due to this reason it is advised to take relief of lenders by using this option if all other options are closed to pay back first mortgager his money.
Requirements and Prerequisites
These loans have proper payback terms and conditions. The time limit to return the money to 2nd mortgager depends on the structure of agreement varies from on year to as many as 20 years. If a homeowner defaults again on his loan and is unable to return money to second mortgager then second loan holder becomes the owner of the property legally.
First Requirement
If we talk about requirements and pre requisites of 2nd mortgage there are many requirements which a person must fulfill .Firstly bank or other finical institutions which are going to pay you loan demands security against loan and the homeowner’s unencumbered interest in their real property. If after all the bank or finical policies the equity of house is significant we move to 2nd pre requisite.
Second Requirement
The second requirement which most of the banks demands is that ratio of debt should be low as comparison with income.
Last Requirement
If the borrower achieves the second goal he only has to meet the last requirement that is proper source of income for the next 12 months because if a borrower has proper source of income and earning money on regular basis then he can be trusted by lender.
Advantages and disadvantages
Some people say that there is no as such advantage of secondary mortgage. There are many advantages and disadvantages of second mortgage that’s why it is called last option.
There are many advantages of 2nd mortgage loans. The rates of 2nd mortgage rates are much less as comparison with the first one. It can allow owner to use the large money of cash for any purpose and plan a better future for him and his family and can get rid of the lenders.
There are also a large number of disadvantages like a person can loose his valuable property if he fails to repay his loan and secondly a person is bound on long term agreement and any can’t afford any misfortune so a person should keep all the things on mind before applying for 2nd mortgage loans.
