Answers to Frequently Asked Real Estate Questions Continued
What is a second mortgage?
A second is the shorter name for a Second Deed of Trust. It is also called a seller carry-back. When a buyer's down payment and loan are less than the purchase price, the seller may finance a portion of the purchase. The lender's loan is in first place and the seller's in second. In the event of a foreclosure the lender in first place receives payment of its full debt while the second place lender receives the remaining funds. If the house is sold or refinanced, the second must be paid in full.
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What is a "forgivable" second?
While any loan may be discounted or forgiven during its life, a "forgivable second" is an agreement by the buyer and seller prior to closing that the note held by the seller will not be paid. The buyer, seller and usually mortgage broker collude together to hide the true level of risk from the primary lender. A more concise term for this practice would be fraud. While the seller carry-back or second is an appropriate practice, this scenario is not.
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Do you have other real estate questions? Call or email me - Jackie Martin
Jackie Martin, Realtor
email: Jackie[at]WeSellStLouis.com
We Sell St. Louis
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