Your home: It’s probably your biggest asset. Having a home to back you up when you need a loan is one of the greatest advantages of home ownership. In recent years, there has been a major increase in the amount of people looking to use their homes as a way to get access to extra money when they need it most. One of the best ways to do this is through a second mortgage.
A second mortgage is exactly what it says it is – a loan made in addition to your first mortgage, and it’s based on the amount of equity you have built into your home. Many people use them to fund home renovations, to pay off credit cards, or to put a child through college. Since you’ve already been through the process once, the underwriting required to get a second mortgage is much simpler than it was the first time around, and the cost of the transactions involved will be significantly lower. This usually makes up for the fact that interest rates on the second mortgage are a bit higher than they were on the first one.
On a second mortgage, you will borrow a fixed sum of money against your home equity, and pay it back over a specified amount of time. The amount you borrow will be combined with the amount you still owe on your first mortgage.
It all sounds pretty simple. There are just a few things to keep in mind. First of all, don’t take out a second mortgage on your home unless you’ve built up a fair amount of equity in the property already- that is, made payments on the original mortgage balance for a good amount of time. You may still be able to get a second mortgage if you don’t have much equity, but your rates will be so much higher, and the amount you can borrow so much lower, that it will essentially be a waste of your time and money. This is one of those things that is worth waiting for.
Also, look into the other options of borrowing against the equity of your home, including a home equity loan and a home equity line of credit. All of these options allow you to borrow against your equity, but there are slight variations among them that mean one of the three may be the best option for you. It will depend, for the most part, on your particular financial standing, the amount of money you need to borrow, and the amount of home equity you currently have.
By: Joseph Kenny
Posts Tagged ‘Original Mortgage’
The Facts About Second Mortgages
February 7th, 2010Understanding And Profiting From Foreclosure 2nd Mortgage Loans
December 14th, 2009
A home to back you up when you need a loan is one of the greatest advantages of home ownership. An individual who has ever been declared as bankrupt or had a foreclosure in the past may think of a foreclosure 2nd mortgage loan. This is much the case because more people are looking to use their homes as a way to get access to extra money when they need it most. And one of the best ways to do this is through a second mortgage.
Second mortgage loans are loans that are made in addition to the first mortgage, and it is usually based on the amount of equity that the borrower uses to build into his home. The second mortgage loan is secured by the equity in ones home. While obtaining a second mortgage loan the lender places a lien on the borrowers’ house. This lien will be recorded in 2nd position after the primary or 1st mortgage lender’s lien, hence the term second mortgage. Second mortgages aren’t for everyone. Borrowing more than 80% of the home’s value will subject the borrower to private mortgage insurance. The monthly payments should also be a factor. If one refinances in the future, he will have to pay off the 2nd mortgage.
On a second mortgage, one borrows a fixed sum of money against the home equity, and pays it back after a specific time. The amount borrowed will be combined with the amount the borrower still owes on his first mortgage. But there are a few things that one should keep in mind. First of all, one should not take a second mortgage on his home unless one has made payments on the original mortgage balance for a good amount of time. One may be able to get a foreclosure 2nd mortgage if one does not have much equity, but then the loan rates will be much higher, and the amount that one can borrow much lower. It will essentially be a waste of time and money.
Usually a second mortgage loan is required to fund home renovations. Since the borrower has already been through the process once, the underwriting that is required to get a second mortgage is much simpler than it was the first time around when the borrower had taken the first loan. The cost of the transactions involved will be lower when the borrower applies for the loan the second time.
This usually happens for the fact that interest rates on the second mortgage are a bit higher than they were on the first one. But then, there are some positive points too. For example, the fact that the interest paid on the loan may be tax deductible. In most cases the interest is 100% fully deductible as long as the combined loan to value of the 1st and 2nd mortgage does not exceed the value of the home.
Loan proceeds from a second mortgage loan can be used for just about anything. Many consumers take out foreclosure 2nd mortgage loans to consolidate debt, do home improvements or pay for their children’s college education. Whatever one decides to do with the loan proceeds it is important to remember that if one defaults on the payment then he can lose his home. So one would want to make sure that he is taking the loan out for a worthwhile purpose
Thus we see that a foreclosure 2nd mortgage loan can be of great help to the borrowers, although the borrower must take steps to ensure that he does not squander away the advantages of second mortgage.
By: Chadrack Irobogo
Tips For Second Mortgage Refinancing To Save You Money
December 12th, 2009
Home loan refinancing has exploded in recent years due to the downturn in interest rates. People who were once paying 8%-10% in interest on home mortgages are now able to get financed at rates as low as 6%. This gives the homeowner a much lower house payment and more money in their pocket. Well, many others are also looking at second mortgage refinancing as well. Here are some tips to help you in this aspect of refinancing.
People get second mortgages on their homes for various reasons. Sometimes it is to get their hands on much needed cash to pay for expenses such as college or a new car, etc. Other times it is to used to purchase a second home. Second mortgages will generally always be much shorter in length than a first. In most cases they run 5-10 years.
Why refinance a second? Just for the same reason you would refinance your original mortgage you want to get a lower interest rate and save money on your loan. It’s a sound financial decision in most cases.
When you make the decision to refinance a second home mortgage, there are some things you should look for before signing any new contract.
- Look at several different lenders to find a good one
- Look online for more information and lending choices
- Always ask questions and if you feel you aren’t getting the right answers…scratch that lender off your list
- Know what closing costs, points and fees will apply to your second mortgage
These are only some of the major points to be aware of when looking to refinance.
You should be able to easily find a good lender if you just ask for referrals and look around. Most people you work with are happy to recommend a lender that they have had a good experience with. Just be careful, check them out, and ask questions. This will assure you that your second mortgage refinancing will go smoothly and quickly.
By: Terry Edwards