Secrets to Wipe Out a 2nd Mortgage
Leverage is the most important concept to understand when trying to eliminate a 2nd mortgage that is past due. If the value of a home has dropped below what is owed, the 2nd mortgage has lost the leverage to foreclose on the property. The 1st mortgage will always be paid in full before the 2nd mortgage gets even a dime of what is owed to them. Most 2nd mortgages will charge off when they go six months past due on payments because they simply have no leverage anymore to enforce the debt. Once charged off the debt will be sold off and written off the lenders books as bad debt.
If you owe more than your home is worth and part of that debt is a 2nd mortgage or equity line, you may be able to save thousands of dollars and wipe out the 2nd mortgage right away. Here are 3 ways to get it done:
Settle In Full If you're looking to quickly wipe out a 2nd mortgage a settlement in full will be the fastest option, it will also save you the most money. You will want to plan on a settlement between 20% - 30% and will need to have the cash on hand in order to take advantage of great offers quickly. Typically in order to receive settlement offers this low the payment will need to be made in one lump sum.
Term Settlement Term settlements are becoming more and more popular as a way to wipe out a 2nd mortgage. This shares the same major advantage of a settlement in full, the final amount paid will be an agreed upon amount lower than the current balance owed. The difference will be that the settlement offers will typically come in higher at the 40% - 60% range. This lower amount will be spread out evenly over 6-24 months depending on how long you can negotiate to stretch it out.
Loan Modification If the value of a home has not fallen enough to leave the 2nd mortgage unprotected, it may not be possible to reach an acceptable settlement arrangement. It doesn't mean there won't be any options, in fact a traditional modification may offer incredible plans to get the loan current and the payments reduced. Recently the government also introduced a program similar to Making Home Affordable that is exclusively for 2nd mortgages. Not all lenders are on board with it yet, but it sounds like its right around the corner.
With all of these options you will need to provide standard documents to outline what your financial situation is and what you propose as a solution. A recent appraisal of the property to show the true current value of the home will help and is great ammunition when negotiating a settlement with the lender.
Always remember that if you have the leverage, use it, make a reasonable offer and stick to it.
If you owe more than your home is worth and part of that debt is a 2nd mortgage or equity line, you may be able to save thousands of dollars and wipe out the 2nd mortgage right away. Here are 3 ways to get it done:
Settle In Full If you're looking to quickly wipe out a 2nd mortgage a settlement in full will be the fastest option, it will also save you the most money. You will want to plan on a settlement between 20% - 30% and will need to have the cash on hand in order to take advantage of great offers quickly. Typically in order to receive settlement offers this low the payment will need to be made in one lump sum.
Term Settlement Term settlements are becoming more and more popular as a way to wipe out a 2nd mortgage. This shares the same major advantage of a settlement in full, the final amount paid will be an agreed upon amount lower than the current balance owed. The difference will be that the settlement offers will typically come in higher at the 40% - 60% range. This lower amount will be spread out evenly over 6-24 months depending on how long you can negotiate to stretch it out.
Loan Modification If the value of a home has not fallen enough to leave the 2nd mortgage unprotected, it may not be possible to reach an acceptable settlement arrangement. It doesn't mean there won't be any options, in fact a traditional modification may offer incredible plans to get the loan current and the payments reduced. Recently the government also introduced a program similar to Making Home Affordable that is exclusively for 2nd mortgages. Not all lenders are on board with it yet, but it sounds like its right around the corner.
With all of these options you will need to provide standard documents to outline what your financial situation is and what you propose as a solution. A recent appraisal of the property to show the true current value of the home will help and is great ammunition when negotiating a settlement with the lender.
Always remember that if you have the leverage, use it, make a reasonable offer and stick to it.