Junior Mortgage

A mortgage subordinate to another mortgage.

Private Second Mortgages that Are Silent

A silent second mortgage is typically a second mortgage offered at preferential (subsidized) terms to those who qualify. These are generally offered by the state through one of three federally authorized programs, the Mortgage Revenue Bond (MRB) program. These programs typically entail a 97% FHA loan and a 3% silent second mortgage that is offered at below-market rates or forgiven entirely after a certain period of time.

Counties and municipalities also offer Mortgage Assistance Programs (MAP) to first-time home buyers that buy in their communities which assist in providing down payment to complete the purchase of the home. These generally come in the form of a silent second mortgage placed on the property at the time of closing that is forgiven after a certain period of time as long as the owner doesn’t sell nor do a cash-out mortgage refinance. Counties and municipalities also offer silent seconds for home improvements and renovations. Check with your local redevelopment agency for more information.

A silent second mortgage for investment properties is different than it is for residential properties. It generally entails second or junior mortgage loan on the property that does not require a scheduled payment until the rental income levels have reached a pre-determined point.

Silent second mortgages are even sometimes used as a workaround for when home owners are behind on their mortgages. Rather than foreclose, the lender might modify the loan by reducing the rate, or offer a "silent second," in which payments on the past-due amount are deferred until the house is sold.

The riskiest form of a silent second mortgage is an unrecorded private money loan from the seller to the buyer during a purchase transaction. An example of this is an 80/10/10 plan where the borrower puts down 10%, the seller lends the borrower 10%, and the first mortgage is 80%. However, Robert Bruss, author of the nationally syndicated "Real Estate Mailbag", states that an unrecorded silent second mortgage can be dangerous for the seller because if the buyer doesn’t make the payments to the seller, the seller can’t foreclose to get the property back.

Maria Ny is an acclaimed free-lance writer who has published many mortgage related articles. Get more info at BD Nationwide Mortgage for Second Mortgage Loans. For more 2nd mortgage advice & home equity refinancing tips, visit Fixed Home Equity Loans and Second Mortgage Refinance Loans.
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