Hi all
Can someone please explain how a second mortgage works? If I borrow 80% from a bank, the bank keeps the title deed as security. If the vendor leaves in 20% IO for 5 years for example, what security do they have? Would the bank know (or care) about the second mortgage? [?]
Thanks for your help
JudiThe second mortgage is just like the first mortgage, but can only come after the first. ie if you go belly up, the first mortgage gets first go and your security property and then the second mortgagor can have their turn. it is more risky for this reason (= higher rates).
I beleive the bank would have to give their permission for a second mortgage to be lodged. Some lenders don’t care, while others won;t allow it.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terry
If I had, for example, $10,000 of usable equity in one IP and nothing else, is it possible I could buy a $100,000 dollar property using a second mortgage? Or does it need to be bought with a deposit and the 2nd mortgage arranged later?
Thanks again,
JudiJudi,
This is easier than you think.
You draw the $10 000 and use it as a 10% deposit and then secure finance with your lender or another lender on the second property. This will be two stand alone first mortgages.
Don’t forget to consider buying costs as well.
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thanks Simon
Don’t forget to consider buying costs as well.
That’s why i was thinking a 2nd mortgage. The $10,000 would be literally all I’d have. It would also be lodoc therefore 20% deposit. I’m looking at options for buying a second property without any deposit, but it won’t happen for a couple of months yet.
Just trying to plan ahead
Judi
why do not you save some money and use a gift from the vendor?
Pica – I hope you’re not about to suggest an inflated contract price ? [
]Judi – Have you thought about an unsecured personal loan (from a mainstream lender) to bridge the gap?
The interest rate could be better than a 2nd and way less hassle.
Getting permission for a 2nd to exist (from the holder of the first)sounds easy but doesn’t always work out that way.
Judi,
Most banks in my experience, would not allow a second mortgage to be registered on title. However, it can be an unregistered mortgage – this will probably increase the interest rate though.James
Some banks will allow second mortgages (Adelaide, Bankwest are two).
Don’t forget you have to show you can service the payments on the second mortgage as well as the first (or teh payments on a personal loan). Or you could use a credit card – some people do!
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks very much everyone. That’s given me some options to consider.
JudiI work as a conveyancing paralegal and we just settled on a property for our clients who had a First Mortgage with National Australia Bank and a Second Mortgage with Credit Union Australia.
Basically, if you want something, you just have to ask. Even if you are told No!, you will learn something from the experience.
Cheers
Shaun[]
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