Dealing with a foreclosure with one loan is devastating enough. Having two mortgages to repay to keep your home is even more challenging. A second mortgage can help remedy a foreclosure for the first mortgage, but you have to qualify for it.
No matter your debt situation, there are several options to explore with the guidance of Kingston family law attorneys who help families with financial challenges. Read on to learn how to prevent foreclosure with a second mortgage in Tennessee.
Can My House Still Be Sold When I Have a Second Mortgage?
Your house can still be sold to recover the remaining debt owed to the various lenders, even if you have a second mortgage. Apart from a property tax lien that receives automatic priority over any other prior lien, the priority of all other mortgages on a property is usually determined by the date it was recorded.
Since the first mortgage is recorded before the second mortgage, it might be given priority. Once the first mortgage lender has recovered what is owed to them, the second and consequent liens will get the remainder.
Can the Second Mortgage Lender Sue Me Afterward?
Unlike bankruptcy, foreclosure doesn’t relieve you from debt. And since second mortgage lenders aren’t given priority in foreclosure, the chances are that they might not recover the money owed to them in full. In an attempt to recover the remaining part of the debt from you, they might take the matter to court.
The promissory note signed while taking the second mortgage can be used to bring a lien against you. Since the lien against the first property is lost, it can be placed on any other property you own. The judge might also order the freezing of your accounts or garnish your wages to help the second mortgage lender recover.
How Can I Use a Home Equity Second Mortgage to Prevent a Foreclosure in Tennessee?
Since this type of second mortgage often allow you to use the money for any purpose, homeowners can use the money to catch up with the repayments of the first mortgage and avoid foreclosure. Depending on the stage of foreclosure, you could be required to cater to other costs incurred by the lender.
Notably, some lenders only allow borrowers to use the money for specific purposes, such as home improvements. With these types of home equity, you might not be permitted to use the money to prevent foreclosure in Tennessee.
What Impact Can a Second Mortgage Have on the Primary Loan?
You can take a second mortgage for a variety of reasons. When they want to purchase a house, some homeowners take it to increase the down payment amount and avoid insuring the first loan. Others take a second mortgage to get a better repayment rate.
If the first mortgage’s repayment period was almost ending, consolidating it with a second mortgage can extend the repayment period. For example, if five years were remaining, you can repay it in 10 years if you consolidate it with another home loan.
How Much Can I Get Through a Second Mortgage?
The equity on your home and the type of second mortgage you choose determine how much you can receive to try and remedy your foreclosure situation. Home equity loans give you one lump sum calculated factoring in what you still owe and the value of the house.
With Home equity lines of credit (HELOCs), you can draw as much as you need in the drawing period. You can explore your second mortgage options depending on your needs. Speak to a real estate lawyer in Kingston, TN, for guidance on what is more favorable in your situation.
Can I Use a Second Mortgage if the Home Value Has Dropped?
Second mortgages are great tools in preventing foreclosure in Tennessee. However, you might not benefit from it if you have little or no equity in the house. This often happens when the home’s value has reduced, and you are required to pay more than the market value.
Lenders only give second mortgages based on the home’s equity. But if there is none, it would be too risky for them. Tennessee real estate attorneys might advise you to consider other alternatives, such as filing bankruptcy if you qualify for it.
What Are My Options if I Can’t Qualify for a Second Mortgage?
If a second mortgage isn’t an option for you, the law provides certain protections that you might want to consider depending on your situation.
It allows homeowners that have missed a few payments to resume regular payments with an added amount, to make up for what was missed.
A wrongful foreclosure lawsuit or asking for time to arrange a private sale are some of the ways homeowners can delay the foreclosure as they consider other alternatives. However, a lawsuit is a risky alternative because the judge might ask you to refund the lender’s legal expenses.
Lenders allow short sales when the value of the house has decreased significantly. They should be ready to accept any proceeds from the sale, even if it is lower than the full expected amount.
Note that some of these alternatives can reduce your home loan benefits in the future. So, make sure that you consult with a Tennessee real estate attorney before considering any of the above alternatives. Only explore the option whose consequences you are ready to live with.
Knowledgeable Real Estate Attorneys Offering Legal Assistance in Kingston, TN
Overwhelming mortgage debt can rob you off your home. When taking up a mortgage, the documents you sign give lenders the right to take your house if you do not make payments as agreed. A job loss or an unexpected medical bill can incapacitate you financially.
With the help of real estate attorneys from Davis Law Firm, you can learn about your options and explore the most favorable one. Talk to us today to restore your rights as a homeowner.