Question:

When is a stand alone second mortgage used?

Answer:

A stand alone second mortgage is a second lien loan funded separately from a home purchase or refinance transaction. It is a loan some lenders will not extend without concurrent first mortgage as in the 80/20 combo loans.

In fact, stand alone second mortgages are the same as home equity loans. They are most often used to get equity cashed.

A stand alone second mortgage can be offered to prime and bad credit borrowers and with full or reduced documentation options. They can also come as a 125% no equity stand alone second to be used for home rehab, cash out or debt consolidation; only that in this case the underwriting criteria will be quite strict.

The 125% stand alone second mortgage will be full documentation, with FICO score above 650. A refinance of the first mortgage is not required, although the 125% no equity loan can be arranged as a combo.

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