Many years ago I took out a second mortgage on my home since the house had grown in value and had at least $30,000 of equity.
This type of loan is an option if you are in dire straits but I would never want to do a second mortgage on my house again. At the time, I thought it was something I needed and it worked out. Looking back, it was a bad financial decision. It added a second monthly payment to my already very tight budget.
I made both the original payment and the second mortgage payment for a couple years until I was able to refinance both loans into a ten-year fixed interest rate loan. Fortunately, I was able to pay off the 10-year loan in about six years.
My bank did ask what I wanted the money for and I told them my numerous reasons. Essentially, they didn’t care, only that I had the financial ability to pay it back and that my property was valuable enough to cover their costs if I defaulted on the loan. They wanted to verify my income, any other loans, and review my previous three years of income tax reports.
After the deal was made, I didn’t hear anything from the Attorney General or any federal judges about my loan from the bank. No one hounded me about my interest rate or the fixed number of years I would pay back the loan. The arrangement was made between my lending institution and me. It wasn’t anyone else’s business.
Let’s say I determine my house today is worth $1 million. It’s not, but I can say it is based on what it means to me. Anyone can value their property for whatever they think it’s worth. Let’s say I go to the bank and want to borrow $600,000 against my “$1 million” house. At this point the bank will do an appraisal and look at my income and any other assets. They will determine if they think the loan is in their favor to make. If in reality my house is only worth $400,000 then they may say we can’t loan you the $600,000 but $200,000 instead. It then becomes the decision of the lender as to how they want to proceed with the loan and how much they want to loan.
If I falsify my financial records in order to get the loan then that becomes problematic. If the lender does a good job in verifying the value of the property, there shouldn’t be a problem.
If the lender for some unlikely reason determines to loan me the $600,000 because I’m a good customer and they like me, then the deal is between the lender and me. Can you imagine a judge or Attorney General saying they don’t like your loan arrangement?
Are the lending institutions after Donald Trump? No. If they think he has done something bad or they aren’t receiving their money they will go after him. The most recent national courtroom scene in NYC is another political sham.
Dr. Glenn Mollette is an author and his column is published in over 600 publications in all 50 states.