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2nd Mortgage                                                                                                         

2nd mortgage products offer a convenient way to take equity out of a property.  For difficult to verify income, stated income 2nd mortgage products are available. Email with questions on a 2nd mortgage. Interest only 2nd mortgage products will lower your mortgage payment. 2nd mortgage products carry a fixed interest rate and amortization periods range from 5 to 20 years with a new 2nd mortgage product amortized over 30 years with a balloon due in 15 years. The longer amortization period lowers your monthly 2nd mortgage payment significantly. In a purchase transaction, a 2nd mortgage is used in combination with a first mortgage to avoid paying Private Mortgage Insurance or PMI. Frequently described as an 80/10/10 or 80/15/5 the first mortgage is set at 80% of your purchase price/value eliminating PMI. Add a 2nd mortgage of 10 or 15% of the purchase price and you supply 5 or 10% cash. Advantages of this approach include:

  • Your entire mortgage payment is tax deductible (mortgage insurance is not)

  • You may pay off your 2nd mortgage early reducing your total payment.

However, there are some potential problems with the strategy.

  • Your 2nd mortgage may include a prepayment penalty - our programs do not

  • Depending on the rate on your 2nd mortgage your total payment may actually be more. Send me an email with your anticipated sales price and I will be happy to run Good Faith Estimates comparing both approaches for you.

2nd Mortgage Ratios

Debt ratios are determined by dividing your total monthly debt by your monthly pretax income. Our programs will allow up to a 45% total debt ratio. If you are refinancing, one effective strategy to get your ratio down is to pay off enough debt at closing. Debt paid at closing is not counted in the ratio calculation.

These mortgage products can be arranged for up to 125% of the value (including your first trust) of the property. Interest rates generally increase any time your combined loan to value (CLTV) exceeds 90%. However, high CLTV rates are generally lower than other consumer or credit card rates and the longer amortization schedule can significantly reduce your monthly payment. I have had clients cut their monthly payments in half using their home equity instead of paying high credit card payments. This approach is referred to as a debt consolidation 2nd mortgage

We have a page on how to calculate your 2nd mortgage qualification ratios.

We have a page on 2nd mortgage documentation requirements.

We offer you the ability to qualify and close into several unique programs which accommodate borrowers with non traditional income or asset situations. 

* I have included a section on the new Cash Flow ARMS. A LIBOR based product which gives you complete flexibility in managing your mortgage.

As a Certified Mortgage Planning Specialist, I offer an analysis of your situation today can make suggestions on how small changes in how your debt is structured today can have a life changing effect in the years to come.  Read more about this free, no obligation service.


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