The First Mortgage Is Your “Primary” Mortgage
Your first mortgage (or lien) can be thought of as your “primary” mortgage loan. This loan is the original loan that you used to purchase your property. Most home buyers will only ever have a single mortgage on their property. However, there are some scenarios (which we’ll discuss in the below section) that may lead to you having two mortgages on your home.
In the event that you default on your loan payments, the lender for your first or “primary” mortgage is also first in line to foreclose on your home and sell it to repay the loan balance. The lender who provided your second mortgage will only be able to claim repayment after the first mortgage lender has done so.
There are two common scenarios in which you may have two mortgages on your home. Let’s discuss them now.
How Else Do Second Mortgages Differ From First Mortgages?
Second mortgages are treated differently than first mortgages for the mortgage interest tax deduction. Up to certain limits, you can write off the interest for your first mortgage on your taxes.
However, this is not usually possible with a second mortgage, unless the money was used to “buy, build, or substantially improve? The home.
Second mortgages are also riskier for lenders. Because the first mortgage lender has the primary claim to the property, the lender providing the secondary mortgage has a higher risk of losing money if you default and stop paying your mortgages. Because of this, interest rates are usually higher for second mortgages, as this helps minimize risk for the lender.
Need More Information About Mortgages? Contact CSMC Mortgage Today!
Navigating the world of mortgages and real estate can be difficult on your own. So if you have more questions about first or second mortgages and require guidance, CSMC Mortgage is here to help. Contact us online or give us a call at (805) 212-7710
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