Second Mortgage Plan
The college offers a second mortgage loan to eligible newly hired employees who are relocating to the Northampton area. The Plan is designed to enhance the college's compensation package and to encourage the purchase of homes in the local area.
Eligibility: You are eligible for a second mortgage loan if you:
are employed in a regular full-time senior administrative position (Grade G and above) or are a full-time faculty member with an appointment that extends for longer than one year;
If you work less than full time or hold a limited-term or temporary position, you are not eligible for the Second Mortgage Plan. The Plan is not available to current administrators or to administrators who own homes in the local area at the time of hire.
Loan Amount and Interest: A second mortgage will be granted for up to $75,000 or 35% of the purchase price, whichever is less. The "purchase price" may include up to 50% of the cost of immediate capital improvements. The mortgage cannot be used for later renovations or home improvements. The interest rate on the second mortgage is established at the time the loan is made and is fixed at 80% of the applicable federal rate (AFR).
Equity in Property: You must have at least 10% equity in the property at the time the mortgage is written.
Term of Loan: The loan will be granted for up to 30 years or for the term of the first mortgage, whichever is less. If you pay off your first mortgage ahead of schedule, you must pay off the second mortgage as well.
Tax Issues: The IRS allows the college to treat the subsidized interest on the second mortgage loan as tax free if the loan is awarded within two years of your date of hire. After two years, the 20% interest subsidy (i.e., 80% AFR vs. 100% AFR) is treated as taxable income.
Location of Property: The property must be located within the local area, which is defined as within a 25-mile radius of Northampton.
Repayment of the Loan: Payments on the loan are made by salary deduction from your paycheck. Loan payments must continue during any leave without pay. The loan balance must be paid in full within 30 days of termination of employment with the college.
Homeowner's Insurance: Because the college has an insurable interest in the property for the term of the loan, you must arrange for and maintain homeowner's insurance in an amount not less than the amount secured by all mortgages. The college must be named as an insured on the insurance policy and a copy of each current policy must be kept on file at the college.
Certification of Title: As a condition of the loan and prior to purchase, you must guarantee clear title to the property by submitting a formal certificate of title to the Office of the Controller.
Evidence of an Obligation: Each loan is secured by the following::
- a promissory note from you (and the co-owner, as applicable) payable on demand;
- a second mortgage on the property purchased; and
- a collateral agreement which sets forth the terms of repayment and which provides that no demand will be made for the payment of the note as a whole if the terms of repayment are complied with. However, if the borrower ends full-time employment at the college, the entire remaining balance of the loan will be due and payable.
Personal Obligation: The loan debt is owed by you (and the co-owner, if applicable) as an individual and cannot be considered discharged by returning the property. In the event the property is sold and does not bring a price equal to the outstanding indebtedness, you are personally liable for any balance due the college on the loan. In the event the property must be sold, the college assumes no responsibility for the sale.
Refinancing the Property: The College will agree to subrogate a second mortgage to an increased first mortgage or will allow its second mortgage to become a third mortgage under the following conditions:
if the total debt obligation on the property does not exceed 65% of the current assessed value;
if the total debt obligation on the property does not exceed 75% of the current appraised value, as provided by a certified appraiser.
Questions about the terms or administration of the Second Mortgage Plan should be directed to the Controller's Office.
The college owns a limited number of private dwellings and apartments which are rented on a space-available basis. Information regarding availability, rates, etc., may be obtained from the 3 College Rental office, located at Amherst College. Call (413) 542-8506 for information.
The members of the Smith College community who are eligible for rental housing are full-time faculty, full-time administrators, Area Coordinators (residence required), Ada Comstock Scholars, graduate students, and teaching assistants.
The President may reserve openings for senior faculty, administrators, and visiting scholars. The Dean of the Faculty may reserve openings for new faculty. After the President and Dean of Faculty have reserved openings, requests for rental housing have priority according to the following guidelines:
- junior faculty members, untenured;
- junior faculty members, tenured;
- senior faculty;
- all others.
If you work less than full time or hold a limited-term or temporary position, you are not eligible for college rental housing. Holders of college-financed second mortgages are also not eligible for rental housing.
The number of dependents in the employee's family will be taken into consideration in the allocation of single-family dwellings.
Leases may be awarded for up to 10 years. Tenants who retire may remain in college housing until May 30 of the year following retirement. In the case of an employee's death, the widow/widower or partner may remain in college housing until May 30 following the first anniversary of the spouse's or partner's death. Tenants who leave the college for any reason except retirement must vacate college housing within 30 days.
The difference (if any) between the fair rental value or 5% of the appraised value of college-owned property and the annual rent which the college charges is treated as a taxable benefit to the employee resident.