A silent second mortgage is a second mortgage placed on an asset (such as a home) for down payment funds that are not disclosed to the original lender on the first mortgage. The second mortgage is called "silent" because the borrower does not disclose its existence to the original mortgage lender.
It is considered “silent” if that second mortgage is used to secure down payment funds and isn't disclosed to the original mortgage lender prior to closing. Failing to disclose a second loan to a lender is very illegal, and borrowers who fail to do so could be prosecuted.
A second mortgage or junior-lien is a loan you take out using your house as collateral while you still have another loan secured by your house. Home equity loans and home equity lines of credit (HELOCs) are common examples of second mortgages.
A “soft second” is a type of second, subordinate mortgage loan that is used to cover down payment and closing costs. The soft second has a deferred payment schedule in which the borrowers do not have to make any payments until/unless they sell their home or refinance their mortgage.
Most lenders want the home to have at least 15%-20% equity available. You can usually borrow up to 85% of the home's current value, minus your first mortgage balance. There are also usually minimum credit score requirements of 600 or better, though some lenders may have lower requirements.
Second mortgages often have higher interest rates than refinances. This is because lenders don't have as much interest in your home as your primary lender does. Second mortgages might put pressure on your budget.
However, there are risks when taking out a second mortgage, and they can be substantial. Notably, you run the risk of losing your home if you can't make payments. Expect to pay closing costs, appraisal fees, and credit checks during the process.
Silent second mortgages are used when a buyer can't afford the down payment required by the first mortgage. They allow a borrower to purchase a home that they otherwise would not have been able to afford. Silent second mortgages from undisclosable sources are illegal.
That term refers to a second mortgage that seemed to have been forgiven or written off - until years later when a collector reaches out about the unknown, but supposedly unpaid, debt.
If a home buyer secretly takes out a second loan from a different lender or a private investor to cover their down payment, it's considered a silent second mortgage. This is because the existence of this loan is being kept hidden from the first lender, which is illegal.
Second mortgages can pose a particular threat to those in financial trouble. Companies that lend second mortgages may hold only junior liens. But they can and do foreclose on borrowers who fall seriously behind on payments. In other words, you need to keep up with HELs and HELOCs as much as you do your first mortgage.
Is the mortgage interest and real property tax I pay on a second residence deductible? Yes and maybe. Mortgage interest paid on a second residence used personally is deductible as long as the mortgage satisfies the same requirements for deductible interest as on a primary residence.
Paying off debts – Taking out a second mortgage can be useful if you have high-interest debts such as credit cards or student loans. The second mortgage can be used to pay those off; you will be able to save money if the second mortgage has a lower interest rate.
Toxic debt refers to loans and other types of debt that have a low chance of being repaid with interest. Toxic debt is toxic to the person or institution that lent the money and should be receiving the payments with interest.
If you were contacted by a debt collector for a mortgage that you haven't heard about in years, then you might have a “zombie mortgage.”
Cash Home Buyers Are Often More Attractive To Sellers
Plus, because cash-only transactions typically happen faster, sellers who are eager to close might be more willing to negotiate with a cash buyer than they would a borrower with a mortgage.
Piggyback loans are a way to buy or refinance a home using two mortgages simultaneously. The first, or primary mortgage, covers the bulk of the total borrowed amount, while the second mortgage finances a smaller portion.
CalHFA's subordinate loans are "silent seconds", meaning payments on this loan are deferred so you do not have to make a payment on this assistance until your home is sold, refinanced or paid in full. This helps to keep your monthly mortgage payment affordable.
On a second home, however, you will likely need to put down at least 10%. Because a second mortgage generally adds more financial pressure for a homebuyer, lenders typically look for a slightly higher credit score on a second mortgage.
But, what exactly is the lowest score you can have and still qualify for a home equity loan or line of credit? The minimum credit score for a home equity loan or HELOC from even the most flexible lenders is set at 640, with very few exceptions to be made for lower scores.
Can you take equity out of your house without refinancing? Yes, there are options other than refinancing to get equity out of your home. These include home equity loans, home equity lines of credit (HELOCs), reverse mortgages, Sale-Leaseback Agreements, and Home Equity Investments.
You own your home outright, so you have 100% equity. Most lenders allow you to borrow up to 80% to 85% of the equity in your home minus your mortgage loan balance. With a $0 mortgage balance, you could be eligible to borrow as much as 85% of your home's equity.
A second loan, or mortgage, against your house will either be a home equity loan, which is a lump-sum loan with a fixed term and rate, or a HELOC, which features variable rates and continuing access to funds.
Homeowners can take out a home equity loan on a paid-off house the same way they would if they had a mortgage on the property. However, using a paid-off house as collateral for a loan is a move borrowers should consider carefully.