Two loans on one home?

Question

Hi,

We all know homes at auctions many times have more than one mortgage.

Can someone explain to me how does an owner get two mortgages on the same house?

I can imagine the HELOC. But Is there any other way how the owner landed up in two loans?

For example can owner take two mortgages at the time of financing a home purchase?

Or, taking a second mortgage a few years later, like refinancing, but paying only part of the first, so carrying two mortgages?

Brian Ploszay · Answer

2nd mortgages were probably way more common before the crash.  The first mortgage has the first lien and therefore has a very high chance of getting repaid.   Second position loans wanted the higher rate of return.    In theory, you can take on many mortgages, but they can never have the same position in the event of a default.

Ron S. · Answer

In today's market? Not likely with those figures. I'm sure there are lenders out there that will go over 80% CLTV (Combined Loan To Value) but in my opinion, unless its a recession proof area, I wouldn't want to be the bank that does, even if everything else is squeaky clean (Credit, income, etc.). There are lenders doing 85% but with your scenario, how desperate is he for $25M? What's it worth? When did he buy it? Those answers would come into play. If he bought for $500,000 and it's worth $600,000, maybe if he's owned it for a period of time? And while you didn't ask the question, what's wrong with a HELOC versus a fully amortized second mortgage?

There are people on the lending side that probably know of more outlets available for over 80% 2nds. I can only speculate on what my bank offers and currently, nothing over 80%.

James W. · Answer

@Ron S., everyone...

Can you play a scenario where Mr. Holmes bought a home for $500,000, and took a mortgage of $400,000.

Now, what does he do to get a second, NON-HELOC mortgage?

Ron S. · Answer

Happened and still happens daily. Market for 2nds tightened up from 2018-2013 but it's going gangbusters again. The only difference I see now is lenders aren't willing to extend past 100% of value...yet.

Sam Shueh · Answer

Conforming plus a second mortgage to make total payment lower. Fairly popular then and people still get another mortgage if lender does not want to lend the total mortgage.

Two loans on one home?

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