Mortgage

Third Mortgage Loans – The Basics of 3rd Mortgage Loans

Even when you already have a first and second mortgage on your home, you may want to secure a third mortgage. You may use the cash for some value-adding feature to your home, like a swimming pool or a new kitchen may be the reason. However, securing a third mortgage is not very easy.

A third mortgage loan stands subordinate to the first and second mortgage liens that exist. For this reason, it is very difficult to find lenders offering third mortgage home loans. The risk is much greater for the lender in case of a foreclosure. If the loan does get approved, which is difficult, it would be at a much higher rate of interest as compared to the earlier mortgages.

A third mortgage is a hard equity loan. The approval usually depends on the LTV or Loan to Value and SSR or Superior mortgage to Subordinate mortgage ratio.

LTV is expressed as a percentage of the present appraised value of the house, as against the total outstanding mortgage debt(s). Lenders expect the LTV for hard equity loans in the case of first mortgages to be sixty five percent and between fifty to sixty five percent, in the case of second mortgages. For third mortgages, it is anything between fifty to sixty percent.

The SSR is calculated by dividing the amount of the superior mortgage loan amount by the amount of the subordinate mortgage and expressed as a ratio between the two. For example, if the superior mortgage were for $100000 and the subordinate mortgage for $25000, the SSR would be 4:1. For hard equity lending, the SSR is usually in the range of 1:1 – 7:1. With a low LTV and SSR, a third mortgage loan may possible.

In a foreclosure proceeding, the first mortgagee is given preference over the subordinate/subsequent mortgagees as a general rule. This means that the entire debt of the first mortgagee is first satisfied, after which any remaining amount is applied towards the debt satisfaction of the second mortgagee. If anything is left after that, only then is the third mortgage paid off.

Recommended Second Mortgage Companies Online – We maintain a list of recommended mortgage companies online and update the list regularly.

List of Recommended SubPrime Mortgage Companies Online

Compare FHA Lender Mortgage Rates and Closing Costs

It is important to compare FHA lender mortgage rates and closing costs, because each lender will have different terms and conditions, and mortgage interest rates may vary considerably.

The FHA does not make loans itself – if this were the case, there would be one standard loan for FHA mortgages. Rather, the FHA insures loans made by private lenders.

Therefore, the first step in obtaining an FHA loan is to contact several lenders and/or mortgage brokers and ask them if they originate FHA loans. As each lender sets its own rates and terms, comparison shopping is important in this market.

In some cases, an intermediary organisation can obtain a range of quotes for you from different lenders, which saves you the time and effort of shopping around to all the different lenders yourself – and saves you from filling out many forms with the same financial information over and over!

When you compare FHA lender mortgage rates and closing costs, remember that a better mortgage interest rate can be offset by high closing costs or ongoing account-keeping fees. Similarly, you may find that a mortgage which offers very low costs to set up actually costs a lot more in the long term, because the mortgage interest rate is higher.

Also be careful to check whether the mortgage rates you are being quoted are for fixed or adjustable mortgages. An adjustable mortgage will almost always have a lower interest rate than a fixed mortgage at the time that you make the decision. However, if mortgage interest rates are likely to rise – as they are right now – you can quickly find your adjustable rate mortgage becoming much more expensive than the comparable fixed rate mortgage would be.

Do not simply accept the first offer you receive from an FHA lender – compare FHA lender mortgage rates and closing costs between several lenders to ensure that you are choosing the right FHA mortgage for your situation.

FHA Loan Requirements

Compare FHA Lenders

The Housing and Economic Recovery Act of 2008 has markedly increased the capacity of the FHA to insure loans for borrowers affected by the US housing crisis. Loan amount limits have been raised in some areas, and other restrictions loosened. FHA loan requirements have never been so generous, and any home owner suffering mortgage stress would be well advised to investigate the possibility of FHA loan assistance.

Mark Bennett is a staff writer for Money Talks, and contributes regularly to other financial sites. This article is part of his series on refinancing, which can be seen at EmergencyRefinancing.com.

What Will Happen to a Mortgage After Filing Bankruptcy?

When a debtor files for bankruptcy they often have questions as to what will happen to their mortgage. This will all depend on the type of bankruptcy they file. It will also depend on if they even decide to include the mortgage in their bankruptcy plan.

Many people don’t realize that when filing for bankruptcy they can choose to file without including certain debts, such as a mortgage. As long as the mortgage is up to date and they can continue to make payments, it is possible that the bankruptcy plan can be filed without including their mortgage lender in the bankruptcy plan.

Chapter 7 vs Chapter 13: Know The Differences

Filing a Chapter 7 bankruptcy means that all debts are going to be discharged and will be wiped away according to the plan. There will be no further payments to these creditors, and the debtors will be giving up any security they had pledged as a result of the bankruptcy. In the case of a mortgage, this means that unless a plan is worked out with the mortgage lender, or the mortgage is not included in the plan, the debtors are relinquishing their right to the property and the lender will then take over the property.

This is why many debtors will not include the mortgage in the bankruptcy plan and continue to pay on the mortgage. When a mortgage is in arrears, it is not uncommon for a lender to modify the mortgage in a way that the past due payments can be added to the back of the loan so that after the bankruptcy has been discharged future payments will be made on time without the borrower having to make up for their past due arrearages.

When filing a Chapter 13 bankruptcy, a plan is put in place to continue to make payments to any secured creditors. While any unsecured creditors will have to be charged off, secured debts such as mortgages or car payments will become part of the plan. These secured creditors will continue to receive payments after the bankruptcy has been discharged, meaning the debtor will be able to retain the rights to their property as long as they abide by the payment agreement set forth in the bankruptcy petition.

This only affects the mortgage arrears, and not the mortgage itself. By filing a Chapter 13 bankruptcy any past due payments can be included in the plan, or may be modified by the lender to bring the account current so that the payments can continue to occur on a monthly basis in a normal fashion without having to pay extra to make up any past due amount after the bankruptcy has been discharged.

While someone may be able to avoid foreclosure by filing bankruptcy, this will not prevent the lender from beginning foreclosure again should future payments not be made. This is why some people file Chapter 13, as they believe they can continue to make timely payments after being relieved from their other debts, while others file Chapter 7 and give up their rights to their property, as future payments will still be a burden. Being able to make payments after the discharge of a bankruptcy is a key factor in what happens with a mortgage after bankruptcy has been filed.

Rob K. Blake, mortgage expert and author, educates mortgage shoppers on finding local providers by state like Indiana Mortgage Brokers and Lenders and provides reviews of national companies like Accredited Home Lenders.