Miami homes with second mortgages face extra hurdles during foreclosure. However, many local homeowners are forced to take out home equity loans or lines of credit. When foreclosure hits, these second loans create problems many owners don’t expect.
What is a second mortgage?
A second mortgage is any loan you take out using your home as collateral while still paying your first mortgage. This includes home equity loans and home equity lines of credit. These loans rank below your mortgage in payment priority, which matters significantly in foreclosure.
What happens to your second mortgage in foreclosure?
When foreclosure starts in Miami, the first mortgage holder leads the process. The sale of your home must first pay off this primary loan. Here’s what can happen next:
- If the sale brings enough money, both loans get paid.
- You still owe the second if there’s only enough for the first loan.
- Second mortgage lenders may sue you for unpaid amounts.
- Some lenders might accept partial payment to settle the debt.
Filing for Chapter 13 bankruptcy might help if your home is worth less than your first mortgage. This could remove your duty to pay the second mortgage. Florida law gives you 120 days after missing payments before foreclosure can start. This time lets you look at ways to keep your home or handle the second mortgage.
The rules about second mortgages in foreclosure change often. Banks handle these situations differently, and your choices depend on many factors. A Miami foreclosure lawyer can tell you what might work best in your case. They know local rules and can help you make smart mortgage choices.
