These are tough times if you need a loan but don’t have sufficient or unencumbered property to offer as a collateral to the Bank or other financial institution. Cash is King and if you need more liquidity fast but your first mortgage lender will not advance any more or cannot act quickly, you might be in unforeseen trouble. A Second mortgage might be the best possible option at this difficult time.

Like many other countries of the world, the mortgage market in Australia has tightened considerably and extensions or increases to existing facilities that might have been offered 12 months ago are simply not available today. Many people in Australia, especially those in small business have been able to overcome short-term financial hazards or “cash crisis” and improve their position through a short-term second mortgage.

Second Mortgage

You may or may not have heard about second mortgages. In simple terms, a second mortgage is made against the same property, which is offered as a collateral in the first mortgage but usually to a different lender. Hence, it is considered subordinate to the first mortgage and ranks behind the first mortgage in terms of security.

The interest rate of second mortgage is higher than the first mortgage. This is because, in case of default, the first mortgage is paid out first then the second mortgage is satisfied from the remaining equity.

Usability of Second Mortgage

In a nutshell, a second mortgage is most beneficial when the borrower needs finance for a specific purpose for a short period of time and they can see how the second mortgage finance can be repaid in the short term. It is a good source of finance for opportunistic investments, or to satisfy an urgent unexpected expense. It is often used as a short-term cure for a business cash crunch or even to take advantage of a business opportunity that presents itself where the business operator can see that he or she can make money, IF they have some money NOW!

Other reasons for a short-term second mortgage might include the need of improvement of existing homes prior to sale, or bridging finance for the purchase of a new property prior to the sale of an existing property.

Overview of mortgage market in Australia

The Australian mortgage market witnessed a tremendous boom during 2003 and 2004. However, earlier this year the market observed a sharp decline in its rate of growth with 12% growth being recorded in contrast to 22 % in 2004.

An analysis conducted by InfoChoice and The Sheet estimates that the Australian mortgage market presently stands at $922 billion. It has been observed that this estimate is around three times greater than the report of Reserve of Australia. It is noteworthy that this study is also 12% bigger than the all-banks estimate in the mortgage industry of Australian Prudential Regulation Authority.

As a rule all big banks play a major role in the market, but usually only provide loans against first mortgage security and do not operate in the second mortgage space. Finance and mortgage brokers originate an increasing share of this Australian mortgage market and these brokers can usually source either first or second mortgages from a wide range of lenders.

Rise of Second Mortgage in Australia

As traditional lenders become more reluctant to lend to existing customers due to tighter credit requirement and liquidity limitations continue in the banking system, more and more borrowers with a need for a short term remedy are turning to a second mortgage lenders to solve their temporary or short term liquidity problem to take advantage of opportunities or to solve their short terms problems.

To be eligible for a second mortgage, you must have surplus equity in your current property. This means that you must owe less with your current mortgage than the value of the property. The second mortgage lender will need to be comfortable that there is a good commercial reason for the loan and that there is an “exit strategy” for the loan. This means that the second mortgage lender can see how the loan is coming to be repaid through some event or process that will satisfy the advance and the charges for the loan.

Nandini
http://www.articlesbase.com/mortgage-articles/second-mortgage-industry-in-australia-755994.html

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"Without recourse," or more accurately, "right to deficiency judgment," only applies to the foreclosure process. "Without recourse" has no meaning in the context of short sales.

"Short sale" means that buyer is buying on the condition that the existing lienholders (1st and 2nd mortgagors in your example) extinguish the liens. Reaching an agreement with the first lienholder does not extinguish the 2nd mortgage, and vice versa.

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We’ll explain the different types of second mortgage loans and why you may consider this type of mortgage loan.

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Many people have heard the term second mortgage used in reference to a loan on a home.

What does the term “second mortgage” really mean? As far as real estate is concerned, a single piece of property can have multiple loans, or mortgages against it.

The loan that is first registered with the county or city is known as the first mortgage. The loan that is registered second is known as the second mortgage.

This has many benefits over a normal bank loan.

There can be as many mortgages on a property as there are lenders willing to provide funds.

If a loan happens to go into default, the loans are repaid in the order they were registered.

So, the first mortgage is paid first, the second mortgage is paid second, and so on. Because of this, subsequent mortgages are more of a risk for the lender.

In exchange for assuming the risk of lending a second mortgage, lenders often charge higher interest rates.

In many cases, the second mortgage has a shorter term than that of the first mortgage. Also present with many second mortgages are fixed amortization schedules and balloon payments.

Homeowners have many reasons for taking out a second mortgage. Some of the most common reasons are for home improvement, increasing cash, paying off other debts, or investing in a business.

In some cases, the second mortgage is used as a down payment for the first mortgage when the home is purchased.

When you are choosing a lender for a second mortgage, you will use many of the same considerations that came into play for your first mortgage.

The interest rate, repayment terms, and fees associated with the second mortgage are some of the primary factors that might cause you to choose one lender over another.

The repayment terms are another factor that you should use to determine a lender for a second mortgage.

Some second mortgage loans can be repaid in as much as 15 or 20 years. However, some loans must be repaid within a year.

Generally, the shorter the repayment period on the second mortgage, the higher the monthly payments will be. You should choose a loan with repayment schedule that falls in line with your ability to repay.

To obtain the loan, you will usually have to pay a fee that is a percentage of the loan. Your lender may refer to this percentage as “points”.

One point is equivalent to one percent of the amount that you borrow. Therefore, if you borrow $10,000 with five points as the fee, then you would pay $500 (5%) in points.

The number of points changed will vary by lender. This is where shopping around will pay off for you.

In some states, there is a limit to the amount of points a lender can charge for a second mortgage.

Check with a banking commissioner or state consumer protection office to find out if there is such a limit in your state.

Make certain that you get the amount of the fee in writing from the lender before taking the loan.

Gerald Mason
http://www.articlesbase.com/real-estate-articles/benefits-of-a-second-mortgage-83170.html

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I bought an older house in a poor neighborhood for about 75 K. Since then, the real estate market has ballooned (New Orleans area), and the neighborhood has improved a great deal.
I recently asked a lender to see how much I could get a home equity loan, and they said not much, as they appraised the house at about 80K.
Funny thing is, the house behind mine, which is a carbon copy of the house I live in, sold a year after mine for 150K!
Can I argue this point to the lender, or do I need to do another kind of appraisal?

You can dispute it, but there probably isn’t going to change unless you get another appraisal. Lenders typically have a pool of appraisers they will use. You may want to try a different lender.

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Foreclosure on a second mortgage occurs after a period of missed payments, and it supersedes the first mortgage company’s interests. Understand how second mortgages work with information from a registered financial consultant in this free video on personal finance.

Expert: Patrick Munro
Contact: www.northstarnavigator.com
Bio: Patrick Munro is a registered financial consultant (RFC) with outstanding sales volume of progressive financial products and solutions to the senior and boomer marketplace.
Filmmaker: Reel Media LLC

Duration : 0:1:25

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I was offer a interest rate of 6.87 for 15 years in 89000.00 with a payment base in 30 years with a balloom payment of 66000.00 in the end of the 15th year. I want to know if I can refinance in few years the second mortgage and get out of the balloom payment.
Now I am traing to consolidate a second mortgage and a line of credit, wichone I only paying interes, nothing agains the credit line

If you are going to refinance your first to payoff your second, then you need to make sure that you do not have a prepayment penalty on either loan. You can refinance your balloon second at anytime provided that you do not have a prepayment penalty stating that you will not pay the loan off or refinance within XX years (prepayments are usually 2 to 3 years depending on the state in which you reside). Prepayment penalties can be costly – usually about 6 months of interest. Balloon loans that are 30 years due in 15 years (360/180) means that the loan is amortized over 30 years but the ballance will be due in 15 years – your payments are based on a 30 year pay term. Verify whether or not you have a prepayment penalty (you can look through your mortgage documents) and you can refinance at any time provided you do not have a prepayment penalty

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Jacksonville Bankruptcy Attorney Chip Parker explains how a homeowner can wipe out (strip) a second mortgage or HELOC in a Chapter 13 bankruptcy.

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All short sales create a deficit – by definition they sell for less than the mortgage balance. As the first mortgage is superior, the second mortgage would bear the full brunt of the shortfall until exhausted. So that makes the potential for the 2nd mortgage holder accepting a short sale far more difficult unless the amount of the loss is reasonable.

However, even in a foreclosure, the second mortgage is fully exposed to the loss first so it all depends on how reasonable the holder of the second mortgage wishes to be. If you have an actual purchase a a specific price, the 2nd mortgage can at least determine the loss and compare it to what would be expected to be realized, if anything, from a foreclosure, offsetting the expenses and time delay of the foreclosure.

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gpizzaboyhttp://gdata.youtube.com/feeds/api/users/gpizzaboyPeople11Second, Mortgage, CrisisSecond Mortgage Crisis 60 Minutes (Finance)

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