Some people looking to buy a second home for either their own leisure or to possibly resell in the future will look into mortgaging that home as well. Many wonder if this is even possible, can you pull out a new mortgage for another home? The answer is yes, you can. However, there are a few things to understand.
Second Homes and Mortgages
When getting any loan, including a mortgage, the lender will calculate your credit score and will also look at your debt. If you already have a mortgage on one home, keep in mind that every dollar owed on that mortgage counts towards you being in debt. This debt ratio weighs heavily in the lender’s calculations. What that means is, even if you can handle the payments of this mortgage perfectly fine, the interest rate will be considerably higher.
If the interest rate and payment plan is manageable and beneficial for your plans, then by all means look into getting that mortgage and the second home. It is difficult for most people to be able to do something like this due to the high costs of mortgages, but some people can definitely handle it.
Another possibility is to use the equity on your current home instead. If you own a good chunk of the equity on your current home, you should consider looking into a home equity loan or line of credit. These forms of loans against the home are essentially a 2nd mortgage on your first home and the interest rates are fairly low. This is a much advised option if you have ownership of a good amount of equity in your home.
Buying a second home and mortgaging it in addition to your first mortgage is definitely possible. But, especially in this case, it is extremely important to look into all options available since it gets trickier the second time around and the interest rates are bound to be higher. Still, over 30 percent of home purchases over the last three years have been second homes, so it can certainly be done.
By: Sergio Haros
Posts Tagged ‘Buying A Second Home’
Second Homes and Mortgages
February 6th, 2010Are You Looking For A Second Property Mortgage? Then Go Online With A Specialist Website
January 20th, 2010
Buying a second home can be exciting but at the same time it can also be stressful and cause great anxiety. Unless you know a lot about finances and in particular mortgages then you are better off going with a specialist second property mortgage broker to get advice when looking for a second property mortgage.
In some cases, a second property mortgage will be secured on your home so it is essential that you make sure you know what you are getting into. The majority of mortgages taken out for the second property mortgage will provide you up to 80% of the total cost of the new property and lenders will usually ask that the property is valued for at least £80,000. All lenders will want to make sure that you will be able to make the repayments on the mortgage and this can be for as long as 25 years.
While you could go shopping around for your second property mortgage it can take some considerable time and even then unless you know what to compare and make sure the terms and conditions are what you want, you could get off on the wrong footing and it could end up being very costly.
That is why it is essential you seek specialist advice, so you understand exactly what your second property mortgage involves.
As with all types of mortgage, the APR is what you have to compare and this can vary greatly and considering the loan can be taken out for a long period of time it can make a huge difference to the total cost of the mortgage. Some thought will have to be given as to how long you wish to borrowing to run for. If you want the monthly repayments to be smaller then you can take the second property mortgage over a longer period but of course this can add hundreds more onto loan than had you paid a little more each month over a shorter term.
By: Sean Horton