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By Logan Weinkauf
Founding Attorney

Secondary home loans, also known as “second mortgages,” offer a way to borrow money during lean times. However, homeowners sometimes find themselves unable to keep up the payments on secondary home loans, and that’s when a Massachusetts loan modification attorney can offer wise counsel and advice. Before defaulting on a home loan, it’s essential for homeowners to understand the legalities surrounding secondary home loans.

Understanding Secondary Home Loans

Some homeowners carry a primary loan and a secondary one. The primary loan is called a fixed mortgage. Often, secondary loans take the form of a home equity line of credit (HELOCs). Borrowing against a home’s equity might be used to pay for many things, such as:

  • A vacation
  • School tuition
  • Automobile
  • Renovation
  • Down payment on a second home

Whether the secondary loan is a HELOC or not, it creates a lien against the home, which has to be satisfied when you sell the house.

The process of getting a secondary home loan is the same as getting a primary loan. The home must be inspected. The equity in it is the collateral. You will have to apply for the HELOC, lock in a mortgage rate, and turn over financial records such as bank statements, credit card statements, paperwork related to the primary loan, etc. Then it will take a month or two to process the loan.

If cash flow is a problem, another way to get some additional cash is to renegotiate your first loan to try to get a new loan at a lower interest rate. There are pros and cons to that type of re-financing, and the cons are mainly a longer repayment time and additional interest to be paid. 

Getting Out From Under a Secondary Home Loan

Under Massachusetts law, you can do something called Lien Stripping, which removes the lien from your house and converts your secondary loan to an unsecured debt that then becomes part of your Chapter 13 bankruptcy filing. You cannot do this, however, unless the secondary loan is greater than the market value of your home. Sometimes by filing bankruptcy, the lender will recognize they are probably not ever going to get repayment of the loan and they will write it off. HELOC amounts are generally not as large as the primary mortgage amount.

Massachusetts state law regarding real estate loans is not simple to understand, especially when you delve into legal facets such as contractual obligations, rights of borrowers and lenders, and regulatory compliance. Attorneys and legal specialists guide borrowers through the process of acquiring a secondary home loan. This includes consultation, paperwork review, negotiation, and dispute settlement. The attorneys at our firm can provide expert advice on your options if you are in danger of defaulting on your second mortgage, including filing bankruptcy. Contact us today to arrange a consultation, and we can explain your options.

About the Author
Logan represents individuals and small businesses in the U.S. Bankruptcy Courts in Boston, Worcester, Springfield, and nearly every county court in Massachusetts. He approaches each case with empathy for the people behind the case. He works efficiently to deliver cost-effective solutions. He has advised people and businesses on creditor and debtor matters across diverse areas of law, including corporate law, real estate, and family law issues. This puts Logan at the leading edge of debtor’s rights, asset protection, and litigation. Logan is a trusted advisor to individuals, families, entrepreneurs, and business owners.