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Second Trust Mortgage                                                                                                         

Second trust mortgage products offer a convenient way to take equity out of a property or provide second trust mortgage financing in a purchase, refinance, home improvement, or debt consolidation. For difficult to verify income, a stated income second trust mortgage is available. An interest only second trust mortgage will lower your payment. A second trust mortgage carries a fixed interest rate for the life of the loan and amortization periods range from 5 to 20 years with a new second trust mortgage product amortized over 30 years with a balloon due in 15 years. The longer second trust mortgage amortization period lowers your monthly payment significantly. In a purchase transaction, a second trust mortgage is used in combination with a first trust to avoid paying 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 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

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

However, there are some potential problems with the strategy.

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

  • Depending on the rate on your second 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 Mortgage Debt 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.

Second trust mortgages 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. 

Learn more about second trust mortgage closing costs

If you are looking for home equity loans rather than a second trust mortgage, I have some extensive information on them

We have a page on how to calculate your Second Trust Mortgage qualification ratios.

We have a page on Second Trust Mortgage documentation requirements.

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.

Learn more about the tax considerations of a home equity loan

As a Certified Mortgage Planning Specialist, I offer an analysis of your situation today can make suggestions on how small changes in how your consumer and mortgage 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 MortgagePrequalify for your Second Trust Mortgage.                                                                                                  


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