What is a first mortgage?
A first mortgage is exactly what it says it is – the first loan on a certain piece of property. No other lien has been taken out on this home. When you first buy a house, the loan you typically receive is a first mortgage.
Back to Top
What is a second mortgage?
A second mortgage is also what it says – the second loan against a specific piece of property. Consider this example: Let’s say you have a first mortgage on your home. The value is $100,000 and you have a $60,000 balance left to pay on your loan. The $40,000 difference is considered equity, or the part of the home that you own outright. If you wish to further borrow against that $40,000, you would be taking out a second mortgage on the home in order to do so. Why borrow against this equity? In many cases, the interest rate you pay on your mortgage is lower than many other types of loans. Interest is also frequently tax deductible for a first or second mortgage, but not necessarily for a car loan or a credit card. (Consult your tax advisor for more information on tax deductibility and home loans)
Back to Top
What does it mean to ‘sell my mortgage on the secondary market’…?
Fear not – This phrase is not nearly as ominous as it sounds. Frequently, your credit union can get you an extremely competitive rate on the secondary market. This is simply a network of large mortgage lenders that work with the credit union to deliver low rates to borrowers. If the member chooses, they can finance their home loan with a secondary market lender, and can do so through the credit union. The credit union may technically hold the loan for a very short period of time before ‘selling it’ to this other lender. The member often makes their loan payments to and receives loan servicing from this secondary market lender.
Back to Top
