Even when you already have a first and second mortgage on your home, you may want to gather 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 contribution 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.
Calculate Mortgage Interest
A third mortgage is a hard equity loan. The approval ordinarily depends on the Ltv or Loan to Value and Ssr or excellent mortgage to Subordinate mortgage ratio.
Ltv is expressed as a ration of the gift 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 excellent mortgage loan amount by the amount of the subordinate mortgage and expressed as a ratio between the two. For example, if the excellent mortgage were for 0000 and the subordinate mortgage for 000, the Ssr would be 4:1. For hard equity lending, the Ssr is ordinarily 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 normal rule. This means that the entire debt of the first mortgagee is first satisfied, after which any remaining amount is applied towards the debt delight of the second mortgagee. If anything is left after that, only then is the third mortgage paid off.
Third Mortgage Loans - The Basics of 3rd Mortgage Loans Calculate Mortgage Interest
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