Secured loans such as a mortgage can be highly popular for millions. Each day, new loans are taken out and when that happens, it’s a fairly straightforward process. Second mortgages are highly popular when it comes to a secured loan and there are a heap of reasons why someone wants a second mortgage. For some, they use the money to put towards a large purchase such as a second home or to repay old debts, or to renovate their current home. However, what do you know about a second mortgage? Maybe it’s time you knew a few things before taking out a second mortgage loan.
Defaulting Can Cause Foreclosure
Homeowners are misinformed when they believe they don’t have to worry about foreclosures occurring with second mortgage loans. However, that’s not quite true. Defaults can cause a home to go into foreclosure. How is that possible if the lender doesn’t hold the primary lien? In truth, the lender can choose to buy your primary loan, which means they can force a foreclosure to recoup their money. It’s not something homeowners know about when it comes to taking out a mortgage and they think if they miss a few payment its fine. While the second lender can’t force a foreclosure, they can take actions to recoup their money.
You Must Repay the Loan
While you might know a second mortgage must be paid, there are actually thousands who believe they can get away with the money and not pay it back. It’s a nice thought, but not something that happens. When you default, a foreclosure can be triggered if the second mortgage company buyers your primary mortgage loan. What is more, it’s still a secured loan, and secured loans have to be paid back. You must repay the loan in full and if you don’t you run the risk of losing the home. Homeowners don’t always know that fact, even though it’s a very basic fact of the loan.
It’s A Second Lien, But Not the Primary Lien
You have two liens on the home with second mortgage loans. The liens would remain in place until the loans were paid back in full. For example, if you were able to repay the primary mortgage loan before the second mortgage, you remove the first or primary lien against the home. However, the second one will remain. A lot of homeowners don’t realize they have two liens against their homes when they take out a second mortgage, so it’s important to understand that before getting a second loan.
Useful For Those Who Need It
The great thing about a second mortgage loan is that they are useful at the best of times. You can use them to free up equity within the home, and allow you to put the money towards a second home or to help the kids purchase their first home. There are lots of options to consider with a second mortgage loan; however, you need to understand what it means for you. When looking into secured loans such as a second mortgage, understand the liabilities you have.