When an individual obtains an additional loan and utilises their existing mortgage as collateral, it is referred to as a submortgage. Essentially, it involves borrowing funds and offering one’s property as security. In legal proceedings, the term sub nomine, which translates to “under the name,” is frequently employed to indicate a name change that occurred during the case.
A submortgage refers to a situation where a person with an existing mortgage uses it as collateral to obtain another loan from a third party. It can also describe a loan given to a mortgagee who pledges their mortgage as collateral. For instance, John initially used his house’s mortgage as security to secure a loan from Bank A. Later, he needed additional funds and obtained a loan from Bank B, using the same mortgage as collateral. This creates a submortgage because the original mortgage was already being used as security for the loan from Bank A. Another example is in a court case where the name of the case may change from one stage to another. For instance, it may be known as Guernsey Memorial Hosp. v. Secretary of Health and Human Servs. initially, but then be changed to Shalala v. Guernsey Memorial Hosp. at a later stage. The Latin phrase “sub nomine” is used to indicate this change, and the abbreviation “sub nom.” is commonly used in case citations to denote the change in the case’s name.
A submortgage, also known as a second mortgage, is a loan taken out on a property that already has an existing mortgage. It is a way for homeowners to access additional funds by using their property as collateral.
When a homeowner takes out a submortgage, they are essentially borrowing against the equity they have built up in their property. The submortgage lender will have a secondary claim on the property, meaning that if the homeowner defaults on their payments, the primary mortgage lender will be paid first from the proceeds of the property sale.
A submortgage can provide homeowners with access to additional funds for various purposes, such as home improvements, debt consolidation, or funding education expenses. It can also be a way to take advantage of lower interest rates compared to other types of loans.
Yes, there are risks involved with taking out a submortgage. If the homeowner defaults on their payments, both the primary mortgage lender and the submortgage lender have the right to foreclose on the property. Additionally, the interest rates on submortgages are typically higher than those on primary mortgages.
Yes, it is possible to obtain a submortgage even if you already have an existing mortgage on your property. However, the approval and terms of the submortgage will depend on factors such as your creditworthiness, income, and the amount of equity you have in your property.
The amount you can borrow with a submortgage will depend on the equity you have in your property and the lender’s criteria. Generally, lenders may allow you to borrow up to a certain percentage of your property’s appraised value, typically ranging from 70% to 90%.
In most cases, you can use the funds from a submortgage for any purpose you choose. However, some lenders may have restrictions on how the funds can be used, so it is important to clarify this with your lender before proceeding.
Yes, you can typically pay off your submortgage early. However, some lenders may charge prepayment penalties or fees for early repayment, so it is important to review the terms of your submortgage agreement.
Yes, it is possible to refinance your submortgage. Refinancing can be a way to secure a lower interest rate, extend the repayment term, or access additional funds. However, the approval and terms of the refinance will depend on your financial situation and the lender’s criteria.
A submortgage does not directly affect your primary mortgage. The primary mortgage lender will still have the first claim on the property, and the submortgage lender will have the secondary claim. However, it is important to consider the impact of the submortgage on your overall financial situation and ability to make timely payments on both mortgages.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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