The Evolution Of A Second Mortgage

by David Jenyns on April 14, 2008

How do second mortgages arise? It then marks up the price of the house and offers it for sale.

The difference between what the buyer pays down and the first mortgage taken by the bank or building and loan association must be supplied by the real estate company in the form of a second mortgage, which the real estate company will sell in order to get its money completely out of the house.

Closely related to this source of second mortgage is the homebuilder. The first and second mortgages may together equal the quick selling price of the house, or even exceed it.

The builder as mortgagor on the second mortgage may or may not be responsible. The individual home seller may create the second mortgage in order to move his house. Few people have $40,000 as a down payment, so the seller may have to take a $20,000 or $25,000 second mortgage to sell his house. Title companies in every city have an “in” on this type second mortgage, which can be very sound, since they participate intimately in closing property sales.

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