2nd Mortgage

Any general questions you might have in regards to loans and finance.
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skp1981
Posts: 1
Joined: Mon Aug 30, 2010 10:22 pm

2nd Mortgage

Post by skp1981 »

Hi there

I have a few questions regarding 2nd mortgages.

Can 2nd mortgages be unregistered? Or do they have to be registered mortgages?

Do I need the permission of the 1st mortgagee to apply for a 2nd mortgage?

What kind of interest rate and loan term would I be looking at (approx.) ?

Are there non-bank lenders that specialize in 2nd mortgages? And if so, can you name some of them?


Look forward to your help!!!

Cheers.

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: 2nd Mortgage

Post by Otto Dargan »

Second mortgages will always need to be registered on the title, otherwise the lender has no protection in the event that you go to get another loan on there as well or if you sell the property.

Generally they are registered as either a mortgage (requires permission from your current lender) or as a caveat (does not require lender permission). Note that this is true for NSW however it may be different for other states.

Interest rates for 2nd mortgages are extortionate. I would recommend that you apply for one as a last resort only. To give you an idea rates generally start at 3% per month (36% p.a.) up to 6% per month (72% p.a.). They are designed as short term loans that do not last more than 6 - 12 months.

The exception to this pricing is when it is used as additional security, such as in a guarantor loan with a second mortgage from the guarantor. Often the guarantor has a mortgage already and a 2nd mortgage is taken as additional security so that their son or daughter can buy a home and borrow 100% without paying LMI. In these cases normal rates are payable.

Major banks will only take a 1st mortgage as primary security, 2nd mortgages are only as additional security. The reason for this is that when taking a 2nd mortgage a lender is taking the lions share of the risk however only a fraction of the profit. It just doesn't make economic sense for them to do that.
Otto Dargan
Mortgage Broker
P | 1300 889 743
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