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Second Trust Loans                                                                                                         

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

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

  • You may pay off your second trust early reducing your total payment.

However, there are some potential problems with the strategy.

  • Your second trust loan may include a prepayment penalty - our programs do not

  • Depending on the rate on your second trust loan, 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.

Second Trust Debt Ratios

Debt ratios are determined by dividing your total monthly debt by your monthly pretax income. Our second trust 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.

They 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 loan. 

We have a page on how to calculate your second trust loans qualification ratios.

We have a page on second trust loans documentation requirements.

Learn more about the tax considerations of home equity loans

Learn about the differences between home equity loans and lines

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.

Second Trust LoansPrequalify for your Second Trust Loans    

 

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