Mortgage Tips
If you were unlucky to buy a house just before the recession and took big loans to fund your purchase, then you may be facing trouble repaying your loans. During the recession, many desperate home owners chose to protect their homes by taking second mortgages with their home equity as collateral to make payments on the first mortgage and manage other necessary expenses. But many of these people are now finding themselves burdened with their second mortgage as house values are still low and it will take quite some time before they reach their pre recession values. If you are in a similar position and are beginning get seriously worried about the fate of your home, then don’t lose hope yet.
Second mortgages are loans backed by a part of your home equity. It is true that the second mortgage lender has a lien over your home, and in case you fail to repay the loan, the lender can stake a claim on your property. But the lender cannot foreclose your property or establish any kind of right over the proceeds until the first loan or the primary mortgage is repaid in full.
Considering the massive costs involved in marketing the house, putting it up for sale and executing the sale, the second mortgage lender will only be deriving a fractional benefit by pushing for foreclosure of your home. It is the primary mortgage lender, who benefits the most from foreclosure; and more often than not, leaves next to nothing for the second loan to get repaid.
In such a scenario, the second mortgage lender will prefer to look for other options to get the loan repayments. If your second mortgage is under trouble or falling behind payments, then you should call your lender and discuss what solution it can offer you, given your inability to pay in full.
You may be pleasantly surprised at how responsive your lender will be to your request for modifying your loan terms to accommodate your current financial crunch. Remember that the first offer that the lender makes will be designed for maximum benefit to the lending organization. You can go back to him and negotiate better and less burdensome terms for your loan that will suit your financial situation better.
As house prices continue to hover at low levels, you can make the most of the situation and use your strong bargaining position to get the best possible principal, balance or repayment period modification for your 2nd mortgage. You can also discuss ‘settlement’ amounts that can be agreed between you and lender to finish off the debt completely.
Even as you explore all these options, you should remember that any kind of settlement or modification of second mortgages is likely to affect your credit report. This will put you at a disadvantage later when you seek loans or mortgages in future. It is best to try and repay your loan at existing terms unless it is no longer possible.
