If you are looking for a resource that may be able to provide you with additional funds, and you don’t want to take out a line of credit, a 2nd mortgage may be right for you. With a 2nd mortgage, you borrow against the equity in your home. There are many lenders ready to compete for your business, and with the internet today you can find the best interest rates in the country in a matter of minutes.
Unlike traditional lines of credit, a 2nd mortgage loan is dispersed in a lump sum payment. When lenders offer you a line of credit, they’re banking on the fact that you are going to keep spending and spending until you reach the credit limit. A lump sum can help to ensure that you use the funds responsibly, protecting the equity in your home and reducing the risk of damaging your credit.
Shop Wisely for 2nd Home Mortgage Loans
You have probably seen advertisements for lines of credit with extremely low introductory interest rates. Lenders offer these low interest rates, and then raise them a few months later. A 2nd mortgage on your home can come with a fixed interest rate. In this case the interest rate remains the same no matter whether you sign up for a five or 25-year loan.
Many people turn to fixed interest 2nd mortgage loans to consolidate debt. Since the interest rate is fixed, you always know exactly how much your monthly payment will be. Some people take out second home mortgages to make home improvements, while others use them to pay for vacations or higher education. No matter why you’re looking for a second mortgage, you can find the best rates from up to four different lenders by visiting one of the many quality online mortgage referral sites available today.
By: Kevin Benner
Posts Tagged ‘2nd Mortgage Loans’
2nd Home Mortgage Loans
January 19th, 2010How 2nd Mortgage Loans Can Help Your Cashflow Problems
January 18th, 2010
You may not realize it often enough that your home is perhaps the biggest asset you possess. When you are in real need of a loan, it can therefore use this advantage to help to solve some of you cash flow problems. Through the years, many people have been using this way to get access to quick money. This article discusses this as one of the most popular ways to do this through 2nd mortgage loans.
The whole idea of 2nd mortgage loans is relatively simple. As the name suggests, these are loans you obtained in addition to your first loan mortgage. Essentially the funds for such loans are calculated and approved depending on the equity amount you would have already paid for your fist loan account. Given that you have already gone through an underwriting process before, it is a lot easier in terms of the paperwork involved for the second mortgage loan. Another benefit you may enjoy is the lower transaction cost given that the second loan’s interest rate is normally higher than that of the first loan
Another benefit that you might be interested to know is that you get tax deduction for interest paid on such loans, as much as a full 100 percent deduction. The only requirement to enjoy this tax deduction is that you must ensure that the total loans from both first and second loans should not exceed the home valuation.
When you are considering your second mortgage loans, take note that you are borrowing a loans amount against the equity of your home and this amount is added with what loan is still outstanding from your first loan.
By: P Lee
Fixed Rate Home Equity Loan Versus Adjustable HELOC: Comparing 2nd Mortgage Loans
January 5th, 2010
Many people think of a second mortgage as a fixed interest, lump sum loan. However, that is only one form of a second mortgage. A second mortgage is actually ANY secondary lien on your home–secured loan with your home pledged as collateral. Second mortgages are typically categorized as fixed mortgage rate home equity installment loans (HELs), also known as home equity loans, and home equity lines of credit (HELOCs) which are adjustable rate mortgages.
The Federal Reserve states that the home equity line of credit annual percentage rate (APR) is a variable rate loan based solely on a publicly available index (such as the prime rate published in the Wall Street Journal or a U.S. Treasury bill rate). The APR does not include points or other finance charges. The monthly payment amount will adjust as your loan balance and interest rate changes. Loan terms can be anywhere from 15 to 30 years.
HELOCs have a draw period, typically occurring in the first 10-15 years, with the remaining term on the loan referred to as the repayment period. During the draw period, you can draw out money on a revolving basis similar to a credit card without applying for a new loan, as long as the amount does not exceed the total amount of the original HELOC. During the repayment period you may be allowed to renew the credit line. If your plan does not allow renewals, you will not be able to borrow additional money once the draw period ends. Interest is paid only on the amount of equity you use.
A Home Equity Installment Loan (HEL) is a fixed mortgage rate loan, which means the annual percentage rate (APR) and monthly payment will stay the same for the life of your loan. The APR for a HEL takes into account the interest rate charged plus points and other finance charges. Loan terms can be anywhere from 5 to 30 years, but are typically 15 to 20 years. Unlike a HELOC, you get a lump sum for which you immediately start paying principal and interest. If you decide later that you need additional funds, mortgage refinancing or getting an additional loan with additional closing costs are your only options.
Which type of loan you choose depends on your financial needs. A HELOC may be best if you have a recurring need for money (e.g., home improvements or a home repair project that has anticipated additional expenses). The security of a fixed-rate 2nd mortgage will probably provide much-needed relief for a large one-time expense (e.g., debt consolidation).
By: Maria Ny