FI 413 Lecture 13: October 5
Document Summary
Second mortgage - loans using real estate collateral, which have a junior claim on the property. Loans are often used for home improvements, educational expenses, or returning credit card debt. Interest if often tax deductible works for first and second mortgages. Deductible on first million principal of 1st and 2nd mortgages used to buy, construct, or improve a home. Up to ,000 of principal or the amount of equity in the properties to be used for any purpose riskier than first. Home equity loans second mortgages with a set term and amortization schedule. Most lenders set the credit limit by taking a high percentage of the home"s appraised value and subtracting from that the balance owed on the first mortgage (#1) Draw period fixed periods during which the homeowners can borrow money. Lenders can prohibit additional borrowings or reduce the credit line. Apr- takes into account the interest rate + points and other finance charges.
