A Soft Second Loan is a type of mortgage loan that provides financial assistance to homebuyers, particularly those with low to moderate income. It is typically offered by government agencies or non-profit organizations.
Soft second mortgages provide borrowers with financial assistance to pay for the required down payment and closing costs associated with purchasing a home and makes it possible for those who do not have savings sufficient to meet standard program requirements to own a home. •
What does a soft second mortgage mean?
Unlike a silent second, a soft second mortgage is often used by first-time home buyers to secure financing for down payments and closing costs. A soft second often won't require a payment until you sell your home and sometimes will be forgiven over time. They're completely legal, if a little unusual.
What Makes a Loan "Soft?"
Soft loans generally have much more favorable terms than "hard" loans. That may include low-to-no-interest and extended repayment periods.
The Bottom Line
Soft loans are an essential tool for many countries that are struggling to fund necessary infrastructure upgrades. While soft loans do help, they often come with strings attached, such as using certain products or companies.
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