Second Trust MortgageA second trustee mortgage
Pros and Cons of Second Trust Mortgages | Home Guides
Secondary trust agreements, usually known as second mortgage agreements, offer an outstanding opportunity to take the capital out of your home. Whilst this options usually carry higher interest charges and payback times than first mortgage, they give you easy liquidity without you having to re-finance your first mortgage.
Like a first mortgage, interest on a second mortgage is fiscally deductable as long as you comply with the regulations of the IRS. They must use the second mortgage as part of the purchase of your home, use it to pay for home improvements of up to $1,000,000, or use it for anything else as long as the second mortgage is $100,000 or less.
Purchasers who want to buy houses with a decline of less than 20 per cent often have to buy PMI (Private Mortgage Insurance). Alternatively to using PMI, you can create a "piggyback" mortgage that mixes a conventional 80 per cent loan-to-value first mortgage with a second mortgage for the remainder. This can be cheaper for well skilled borrower than taking a low down for the first mortgage and making the PMI payments.
A second mortgage allows you to keep your mortgage on the spot and make a seperate, short-term mortgage that you will disburse faster. Whilst second rate mortgage bonds generally have better interest Rates than other types of bonds, such as car credits, consumer credits and bank credits, they still tended to be more costly than first rate mortgage bonds.
It is not unusual that the interest for a second mortgage is 50 to 100 per cent higher than the interest for a first mortgage. In combination with the faster payback time that second mortgage loans usually have, this can result in a higher payout than you might have anticipated. If you take out a second mortgage, you pledge your home as security for the debts.
More serious is the danger that you could loose your home if you do not make your second mortgage payment. In this sense, you should carefully consider how to use the income from a second mortgage.