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Second Marriages, Third Mortgages and Numerous Step-Children
by Marjorie Dorfman

page 2

Usually, buying and selling a house is a very big deal, and one that doesn’t go away soon (like an invasion of mosquitoes or a visit from annoying relatives). Most people spend a quarter of their lives paying off the loan they took to purchase a house and that is only half of the problem. If you haven’t already guessed, the other half is having the bank approve the huge loan to buy the house. If you have done it before and have been responsible, it will be somewhat easier. Do not think, however, this will help you evade the third degree you will still get from the bank as they inspect and pick apart every aspect of your credit history. They are a nervous lot and expect you to pay back the enormous amount of money you are borrowing from them. Where do they get their nerve? I’m sure I don’t know. (I’m a homeowner, but I have changed my identity three times over the years.)

The biggie with second and third mortgages is something called the loan to value ratio. The LTV ratio is obscurely defined as:
LTV= Total Loan Balances (first mortgage + second mortgage+third mortgage) / Fair Market Value of the Property.

If the borrower is applying for a first mortgage and there will be no other loans on the property, then the beginning balance of the new loan requested should be listed in the numerator. (That refers to the part of the equation before the slash for those of you as gifted with mathematical concepts as I am.) If, however, the borrower is applying for a second mortgage, then the lender should insert the sum of the first and second mortgages in the numerator. Similarly, if a third mortgage is involved, the lender should insert the sum of the first, second and third into the numerator.

When the borrower is applying for a second or third mortgage, the loan-to-value-ratio is often known as the combined loan-to-value ratio (CLTV ratio). The denominator of the equation (stuff after the slash) involves the fair market value of the property that is determined by an appraisal. Mortgage brokers often base their loans on the appraised value of the property rather than the purchase price. Lenders always base their maximum loans on the lower of purchase price or appraisal because an appraisal is really no more than an estimate of fair market value, no matter how competent or conscientious the appraiser may be. If a property sells for "x amount", then it is probably only worth x, even if this doesn’t seem as obvious as ABC.
dine and dance
Life, love and second marriages are all a part of the grand casino that comprise life and all its opportunities. In a way, everything we do is a gamble because we can’t count on results even if we can bet on them. There may be a pot of gold or confederate money at the base of that rainbow, but that shouldn’t stop anyone from searching for it. Life is short and how many chances do we get to grab that gold ring anyway? Well, maybe one more. Take it on yourself. I’m going over to the roulette wheel and put half my money on black. What do you think? Half on red, you say? Well. Fine. Good luck! At least one of us will win!



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