"Barry Gold" wrote in message
...
Bob Ward wrote:
OK, professor - now explain second mortgages. How does one borrow
additional money against an unowned asset?

You borrow against your equity -- the difference between the current
value of the house and what you owe on the first mortgage.

But I think nowadays most loans are made on "trust deeds", not
"mortgages". Under a trust deed, the borrower remains(*) the owner,

Actually, that's not true. I believe you're speaking of what's more
commonly known as a land trust. A land trust is a contract that is often
used to circumvent the bank's due on sale clause. It basically guarantees
you the actual deed upon faithful execution of the contract, but in the
interim the owner retains actual ownership. You haven't technically sold
the property, but promised to transfer ownership upon completion of a
contract. The contract can transfer complete control of the property to you
if written correctly, and is almost identical to a mortgage.

but the lender is a "trustee", with the power to sell the house if
the buyer breaks the loan contract.

Hence the buyer can take out a second trust deed, using the same
asset.

(*) or becomes the owner, in the case where the trust deed is used to
buy the house.
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