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How to Remove, Eliminate or Strip a 2nd Mortgage Off a House - Part I

Posted by attorney John Merna

How to Remove, Eliminate or Strip a 2nd Mortgage Off a House - Part I:

What is a 2nd Mortgage?

A second mortgage or a second lien on real estate is a loan given either at the time of purchase or taken out later and secured by the real property. A second mortgage refers to a junior lien or mortgage that has a second position in the heirarchy of liens in their claim for value against the real estate in question.

In recent years, 80/20 loans for the purchase of real estate were popular as a means or cirumventing down payment requirements or the need for additional insurance. The "20" refers to a second mortgage for 20 percent of the purchase value. In essence, the loans for the purchase of the property were broken down into two loans: a first mortgage for 80 percent of the purchase price and a second mortgage for 20 percent of the purchase price.

Additionally, during the real estate boom of the mid- 2000's, another popular method of obtaining a second mortgage was through a loan secured by a second mortgage in many cases a line of equity against the house. Because of the rocketing values of homes at the time, lenders saw this as a safe risk.

Now during the real estate market crash many of these second loans are no longer secured by home values as the values have sunk below what is owed on the first morrtgage. Homes that are worth less than is owed on them are commonly referred to as "under water". As these home values have "sunk" and made these second mortgages basically unsecured it has created an opportunity to reomve or eliminate the completely.

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