Second mortgage is usually a loan taken after the first mortgage which are usually taken to pay the debts, improve financially, to make payments on first mortgage, to make house repairs, education and medical expenses and to avoid private mortgage insurance DC Fawcett Reviews .
It is usually characterized by higher rate of interest than first mortgage and amount that is allowed to borrow is based on home equity.
The time period of second mortgage ranges from one year to 20 years, when the term is shorter; the monthly payments are quite high.
They are of two types namely fixed rate and home equity line of credit (HELOC) and investors prefer latter because the rate of interest can be fixed for certain period of time for the corresponding second mortgage value and then the rate can be adjusted for remaining period of time.
This scheme has maximum borrowing limit where the borrowers are allowed to withdraw money for the entire lifetime of the loan.
Eligibility for the second mortgage is same as the first mortgage where a new home appraisal is required as well as the duty of the new lender is to check for the borrower‘s financial status whether to finance the loan or not. The other factors to be checked are low debts, employment history of the borrower and equity of the first mortgage.
Approaches of getting second mortgage:
- Mortgage broker
- Online lender
Benefits of using second mortgage:
- Borrowing large amount
- Low interest rates compared to personal loans
- Tax deductions are possible
DC Fawcett reviews states the following drawbacks are encountered while availing second mortgage
- The foreclosure is possible can be done by a second lien holder when borrower fails to make monthly payments. At that point of time, the first lien holder requests the second lien to remove the entitlement of the property and goes for a settlement with the borrower. Then necessary actions can be taken by seeking the court, to make legal procedures and verdict would be borrower is bankrupt.
- There is no closing cost but it is rolled into cost of the loan, so the borrower anyway pays the amount in other way.
- When you sell off the property, the borrower should pay off second mortgage loans or transfer to a new mortgage
Second mortgage scams are of 3 types and investors should be careful enough not to fall in trap.
- Balloon payment (a repayment of the outstanding principal sum made at the end of a loan period)
- Voluntary insurance ( lenders may ask to buy a new insurance scheme which is unnecessary)
- Prepayment penalties: it is always better to prepay and finish off the loan. The penalty charges and accusation of lenders is wrong.
DC Fawcett Real Estate – Benefits and drawbacks of using Reverse Mortgage
Reverse mortgage is applicable to senior citizens who are 62 years or above to avail loan without selling the house and retains the property ownership. This method helps the old people to stay in their home after the retirement and bank pays the monthly mortgage to the lender DC Fawcett.
Once the borrower relocates or passes away or when entire property is sold out; the amount has to be settled to the lender. Reverse mortgage is the last solution during the mortgage crisis where borrower is free from mortgage interest and loan amount.
It is applicable when the borrower earns minimum income and all financial expenses have to be dealt preventing from foreclosure. The method is used to fund the senior citizens who want to increase their income as their house is considered to be their largest asset after retirement. The 3 qualifying factors to avail loan are age of the citizen, value of the property and interest rate.
Dc Fawcett Reviews states the advantages and drawbacks of using reverse mortgage
- Disbursement option (i.e. you can either take checks every month or take a lump sum from the bank
- Senior Citizens continue to live in the same home and entitled to have property ownership
- The reverse mortgage funds can be used to pay the existing mortgage loans
- Heirs of the senior citizens are not legally answerable if the loan amount due exceeds the property value and can avail home equity after paying reverse mortgage loans.
- Tax free revenues and low interest rates
- Taking a lump sum to cash out is not a good idea as it results in annuity.
- Not suitable if there are younger members in a family /joint family system
- Value of the property may decrease
- Insurance premiums like FHA and other fees are quite expensive.
- Decrease in equity resulting in less amount left for heirs of the senior citizen
- Should reside in the same house until all property taxes and insurance premiums are paid, else it results in foreclosure.
Reverse Mortgage scam is usually in form of misleading information like economic stimulus notice, government lending division, FHA house benefit program which falsely state that the heirs of the senior citizens will continue to inherit the house.
Dc Fawcett has given his solutions to on-going complaints received from the investors regarding reverse mortgage. They are,
- The lender is entitled to take the property ownership which is absolutely not true, the ownership remains with the borrower.
- The loan may exceed the property value is also false; the reverse mortgage scheme ensures that the heirs will not have more loan value at time of maturity.
It may lead to eviction is not true, the time of leaving the home is absolutely borrower’s choice.
DC Fawcett Real Estate Views On Mortgage Payments And Foreclosure
What is a mortgage transaction?
A mortgage transaction occurs when one is unable to pay the entire amount while buying a house and requires a loan to make the rest of the payment. DC Fawcett A mortgage is a legal document where the property is held for security. Borrower and lender are the two persons involved in the transaction.
A legal agreement is signed between the lender and borrower stating that he/she is in debt and responsible to pay the amount within the stipulated time. Failing to do so, the lender gets the property until the borrower pays the rest of the amount. The legal agreement is called promissory note.
What is a foreclosure?
Foreclosure is a legal process where one loses his/her home due to nonpayment of mortgages. It is applicable when the borrower does not pay his installment for 3 months. It is valid up to 10 years of time period which makes the condition worse for the future lenders to select him/her as the borrower. It is a seriously depressing issue when one loses his/her home through this process, thus steps must be taken to prevent it from happening. If needed, the support can be taken from reliable agencies to solve the issue.
Causes of foreclosure:
*loss of job
Procedure of foreclosure:
The lender should send a prior notice (i.e. 30 days before) to the borrower stating that the payment should be made immediately which is due; else the property will be transferred in the lender’s name.
There are two types of foreclosure namely judicial and non judicial
- Judicial foreclosure is entirely supervised by court; they send a legal notice to the borrower that payment has to be made else the property will be sold in auction for the highest bidder after the auction.
- Non judicial foreclosure which does not involve supervision of court, the foreclosing party specifies the amount due and sends a notice to the borrower.
This situation occurs when the amount to be paid to the lender is more than the property value. But the borrower is free from his debt once he pays the difference amount only.
Types of Foreclosure scams:
Consultant companies are usually involved in these scams. The ways in which fraudulent scams may occur are
*via internet or telephone
Dc Fawcett has stated his reviews on how to overcome when there is a shortage of mortgage payments. They are
*Modify the existing loan, in addition to that there must be a certain proof that the borrower is undergoing financial crisis and own a proper household name.
*Selling the property
*Giving out for rental purpose where the amount is equal to mortgage payment
DC Fawcett who is a renowned real estate mentor is the founder of DC Fawcett Virtual Real Estate investing club. The investors who are interested in buying second home or in process of making large investment by taking up second mortgage can have a look at his blog to know more about it.
DC Fawcett has presented several ways on how to overcome mortgage issues and foreclosure. His virtual real estate investing club contains blogs where investors from anywhere in the world can submit their trades before investing his/her capital which would also help other traders from different backgrounds to know the ongoing real estate scenario better.To master the art of virtual real estate wholesaling, the interested investors can join DC Fawcett Virtual Real Estate investing club to know more about reverse mortgage.