125 second mortgage

What is second mortgage

second mortgage is a mortgage taken on the same asset on which first one was taken. For example you can take first mortgage on your house and can take one more mortgage on that house which is known as second mortgage.

What is 125 second mortgage

125 second mortgage is similar to that second mortgage but the Combined Loan To Value ( that is total amount of both mortgage s) is 125 percent of the value of your asset. To understand CLTV (Combined Loan To Value) suppose following condition:

Value of your Home (Asset) $200000

Value of First mortgage $180000

Value of second mortgage $70000

Total value of Both mortgage s $250000 Combined Loan To Value Ratio 1.25 that is 125 percent of asset value.Above conditions are an example of 125 second mortgage.

Advantages lenders:

second mortgage is advantageous for lender in the perspective of total money they will get from loan repayments.
Due to 125 percent amount more and more clients were interested into 125 second mortgage. There is no bound of taking second mortgage from the lender which has landed you first mortgage, you can also get second mortgage from any other lender. So that was also an advantage for second mortgage lenders.
If property prices falls then lenders are getting more benefit. CLTV ration in such condition rises and in such condition the consumer have to pay more.

Disadvantages lender:

if loan defaults then it no more a deal of profit. Reason very simple, in default loan conditions the first lender is given preference. First lender take over the asset and sell it to recover its loses, anything left then after is for the second mortgage lender. In such conditions second mortgage lender have to suffer loses.
If property prices rises then there is more equity in the asset hence the consumer have to pay less, because CLTV ratio goes down. But if in such condition loan defaults then second mortgage lender have some chances to recover its loses.

Advantages consumer:

the biggest advantage to consumer(you) is that you are getting more then the value of your asset. Which is not possible in any other type of personal loan.
If prices of your asset rises then you have the upper hand. In such times CLTV ration goes down means you have to pay less interest.
There is no hard and fast rule for the second ">mortgage loan money, you can use it in what ever way you want. You can pay balance bills, tuition fee, buy luxury items etc.

Disadvantage consumer:

you have to pay higher interest rates as compared to first mortgage. Due to the unsecured nature of 125 second lenders charge a bit higher rates.
If price of property falls then you are the under dog. Here CLTV ratio goes up that means you have to pay more amount as interest.
You can't sell out your home or asset until you have paid out the complete loan. So in personal problems you are helpless.

Now a days 125 second mortgage is a rare site because of large number of defaults. Many lenders are pulling of there offers from the market.

125 second mortgage

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