What should I expect when negotiating with a lender on our 1st and 2nd mortgage?

Submitted by surfcanada from CA - 04/04/2009 - 4:30pm

We are in the midst of negotiating with our 1st mortgage lender after both my wife and myself being laid-off for over a year.  My wife is back to work now and I am still looking.  From what I can tell, I have to negotiate with my 2nd mortgage also.  I'm not sure what to expect from the lenders.  Should I trust that they will give me the best deal?  Should I haggle?  Will they try to trick me? Should I try to negotiate with 1st mortgage first or does it matter?  Do the 2 lenders need to talk to each other?  Do the lenders own a percentage of the house, the 1st a certain percentage and 2nd a lesser percentage?  It seems like the 1st mortgage has all the leverage?

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Comments

Submitted by Sean - 04/14/2009 - 12:01am

Without amounts it is a little tough, but generally: 1) You should trust that they will work hard to get themselves the best deal, 2) You should haggle, 3) We are seeing cases where they are outright lying - for example saying they will be able to collect from you even after foreclosure (not true for purchase money loans), 3) You'll likely need to negotiate with each independently, 4) The lenders may not need to talk - the one problem that can come up is that in certain instance the 1st mortgage may need to refile their loan in which case they'd need the second to subordinate to the 1st - but you are unlikely to have to worry about that, 5) you own the house, they only have the right to be paid, and to foreclose if you don't pay, 6) they are entitled to the amount the are owed in the note, not a percentage of current value - though they may be willing to take a percentage of current value vs. foreclosing, 7) And finally, yes the 1st mortgage does have first shot at getting all their money back.

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