FAQ: What Is A Silent Second Mortgage Loan?

A second mortgage is an additional mortgage on one piece of property. It is considered “silent” if that second mortgage or loan is used to secure down payment funds and then not disclosed to the original mortgage lender prior to closing.

Who benefits from a silent second?

When used as down payment assistance, second mortgages may carry a zero or low-interest rate; or interest may be deferred for a certain amount of time. This means that the borrower can focus their effort and resources on paying off the original loan first while the secondary loan remains silent.

Can you refinance with a silent second?

CalHFA’s subordinate loans are “silent seconds”, meaning payments on this loan are deferred so you do not have to make a payment on this assistance until your home is sold, refinanced or paid in full.

What is the downside to a second mortgage?

Disadvantages of second mortgages include the risk of foreclosure, loan costs, and interest costs. Second mortgages are often used for items such as home improvement or debt consolidation.

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What is a soft second mortgage?

A “soft second” is a type of second, subordinate mortgage loan that is used to cover down payment and closing costs. The soft second has a deferred payment schedule in which the borrowers do not have to make any payments until/unless they sell their home or refinance their mortgage.

Are Silent mortgages illegal?

Silent second mortgages that are not disclosed to the original lender are illegal and borrowers who use them could be prosecuted for mortgage fraud.

How do I get rid of a silent second mortgage?

Borrowers can avoid silent second mortgages by applying for a down payment assistance program. Currently there are several down payment assistance programs available through both local and state governments, and at the federal level.

Can a seller hold a second mortgage?

Seller carryback financing is basically when a seller acts as the bank or lender and carries a second mortgage on the subject property, which the buyer pays down each month along with their first mortgage. It also makes your home more attractive to buyers, and can boost the sales price of your home as well.

How can I get rid of a second mortgage?

Filing for bankruptcy can eliminate your second mortgage debt. If an appraiser determines the value of your home is less than your first mortgage, or is upside down, Chapter 13 lien stripping may be possible. The bankruptcy court essentially converts your second mortgage into an unsecured debt.

What is required to get a second mortgage?

To be approved for a second mortgage, you’ll likely need a credit score of at least 620, though individual lender requirements may be higher. Plus, remember that higher scores correlate with better rates. You’ll also probably need to have a debt-to-income ratio (DTI) that’s lower than 43%.

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What’s the point of a second mortgage?

The best reason to get a second mortgage is to use the money to increase the value of your home. Using the money from a second mortgage to improve your home’s value can maintain the equity you have in your home.

Can you have 2 mortgages on the same property?

A piggyback mortgage is when you take out two separate loans for the same home. Typically, the first mortgage is set at 80% of the home’s value and the second loan is for 10%. The remaining 10% comes out of your pocket as the down payment.

Does a second mortgage hurt your credit?

In addition to the higher mortgage rates, there are additional fees that you’ll owe if you want a second mortgage. And if you need a second mortgage to pay off existing debt, that extra loan could hurt your credit score and you could be stuck making payments to your lenders for years.

How do you get closing costs waived?

7 strategies to reduce closing costs

  1. Break down your loan estimate form.
  2. Don’t overlook lender fees.
  3. Understand what the seller pays for.
  4. Get new vendors.
  5. Roll the cost into your mortgage.
  6. Look for grants and other help.
  7. Try to close at the end of the month.
  8. Ask about discounts and rebates.

Are there grants for closing costs?

There are grants and loans are available to help with closing costs at the local, state, and federal levels. If you qualify, you might find you could receive thousands of dollars to help with your mortgage costs.

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Can closing costs be included in loan?

The most cost-effective way to cover your closing costs is to pay them out-of-pocket as a one-time expense. You may be able to finance them by folding them into the loan, if the lender allows, but then you’ll pay interest on those costs through the life of the mortgage.

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