| The first mortgage on a home has the term of | | | | asset. So it is vital that you ensure that |
| typically 15 to 30 years. The monthly | | | | you can comfortably repay the loan before |
| installments are divided over this term such | | | | making any commitment. Refinancing second |
| that by the end of the term mortgage is paid | | | | mortgage packages provide affordable |
| off. However, over the years the equity that | | | | solutions to those needing finance at |
| is the interest on property increases, as | | | | manageable rates. |
| there is an appreciation in the value of | | | | |
| home. This provides the owner with an option | | | | Now, if you're refinancing your second |
| to take a loan against this equity in case he | | | | mortgage, you should know about the Home |
| is in need of money. This loan is taken in | | | | Ownership and Equity Protection Act of 1994. |
| addition to the existing mortgage on the home | | | | The law addresses certain deceptive means in |
| and such a loan is called second mortgage. It | | | | refinancing second mortgage. It amends the |
| has a higher interest rate and is for a | | | | Truth in Lending Act (TILA) and establishes |
| shorter term. Or if a person is not able to | | | | requirements for certain loans with high |
| pay these installments a balloon payment | | | | rates and/or high fees. Here's what loans |
| option i.e. a large single payment at the end | | | | are covered, the law's disclosure |
| of the term is also available. | | | | requirements, prohibited features, and |
| | | | actions you can take against a lender who is |
| Even after a second mortgage, suppose you are | | | | violating the law. |
| not able to fulfill your financial | | | | |
| commitments and other debts then refinancing | | | | The law covers a loan if it meets the |
| the second mortgage is a popular solution | | | | following tests: |
| that could prove ideal for you. Through | | | | |
| refinancing second mortgage you can enjoy | | | | 1)An original mortgage on the property, the |
| good interest rates plus more convenient | | | | annual percentage rate (APR) exceeds by more |
| repayment terms. These factors offered by | | | | than eight percentage points the rates on |
| second mortgage refinancing improve the | | | | Treasury securities of comparable maturity. |
| debtor's money in hand as well as offer low | | | | |
| monthly payments. When you go for an | | | | 2)A second mortgage or a refinance second |
| unsecured loan one has to give high monthly | | | | mortgage, the APR exceeds by more than 10 |
| payments and high interest rates. However if | | | | percentage points the rates in Treasury |
| you take up refinancing, second mortgage | | | | securities of comparable maturity. |
| loans are often the most effective and | | | | |
| affordable solution, as they allow you to | | | | On these loans and refinances the lender must |
| borrow the money with no extra rates on your | | | | |
| loan. As compared to other unsecured loans, a | | | | 3)Give you a written notice stating that you |
| second mortgage loan is secured on your home, | | | | can withdraw even though you've signed the |
| thus providing the lender with more security | | | | loan application. You have three business |
| and he can therefore offer far better rates | | | | days to decide whether to sign the loan |
| of interest. | | | | agreement. |
| | | | |
| Refinancing second mortgage loans provide a | | | | 4)The notice must warn you that, because the |
| far longer repayment period than other | | | | lender will have a mortgage on your home, you |
| unsecured loans. Moreover they are a good | | | | could lose the asset, if you fail to make |
| option available for people with a bad | | | | payments. |
| credit. Since these loans are secured | | | | |
| against an asset they provide you with low | | | | The lender must disclose the APR, the regular |
| interest rates and very low monthly | | | | payment amount (including any balloon payment |
| repayments as compared with a loan that was | | | | where the law permits balloon payments), and |
| not secured. The blend of these factors helps | | | | the loan amount. |
| to make these loans far better value for | | | | |
| money. | | | | You may have the right to sue a lender for |
| | | | violations of these new requirements. In a |
| Now an important point is that with a second | | | | successful suit, you may be able to recover |
| mortgage the refinance amount is secured | | | | statutory and actual damages, court costs and |
| against your property, and therefore failure | | | | attorney's fees. In addition, a violation of |
| to keep up with repayments on the second | | | | the high-rate, high-fee requirements of the |
| mortgage could result in you losing your | | | | TILA may enable you to cancel the loan. |