If you’re looking for options to repay high-interest hard money loan or need financial assistance for making a major home repair, second mortgage loan may be the right choice for you. Here in this article, we will discuss all the points you need to consider, before applying for a second mortgage or hard money loan, and what platforms are available to provide assistance for the same.
A second mortgage loan is taken against the equity you have on your home when you applied for the first mortgage or hard money loan. There are two methods of the second mortgage:
- Home equity lines of credit are processed exactly like credit cards by letting you borrow an amount to a pre-set limit. Later, repay the loan by flexible payments with interest rate amount.
- Home equity loans work the same as the first mortgage which includes borrowing of a fixed amount and then repaying it with fixed monthly payments along with interest.
The chief advantage of availing a second mortgage loan is the low-interest rate than the conventional bank or unsecured loans. But, with getting such loans, always keep in mind to repay the loan amount on time as it can lead to the loss of your property, in case you are unable to keep up with the repayment. Also, the second mortgage interest rate is tax deductible if being used for purchasing, building or improving the real-estate property.
What happens if you don’t pay your second mortgage?
When unable to pay the second mortgage loan amount, the financing body puts a foreclosure on the property and gets the remaining amount balance. In case of a foreclosure, the money from the sale of the property first covers first mortgage amount, and then the second one. The remaining amount goes to the property holder directly. If the sale amount doesn’t cover the mortgage amount, the hard money lender owns complete right to file a legal case in the court, before putting a foreclosure to the property.
How to avoid a foreclosure?
It may be possible to dodge a foreclosure of the property when one is unable to repay the loan amount. Either go with the option of settling the debt or negotiate to get a new financing plan.
Both first and the second money lenders need to come to an agreement for splitting the proceeds of property sale. Any of the hard money lenders can file a case for not covering the loan amount from the sale of the property.
Selling the home for repaying the loan amount is a feasible option is done just like any other mortgage. After the closure of the deal, all the proceeds are to be paid for covering the first and second mortgages.
If you’re considering to get a second mortgage loan or facing difficulty in repaying the first one, ask from assistance from Syberloans.com, a platform which provides a list of genuine hard money lenders in your area, and learns more about second hard money loans from the experts.