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 ‘Rates Mortgage’
The Facts About Second Mortgages
February 7th, 2010Easy Money – 2nd Mortgage Loans
December 15th, 2009
At one point or the other you may discover that you need to make additions to your home, get money to finance a much desired vacation or buy a new and admired car. This will mean that you need more money. Normally you would want to get a traditional loan but there are other options. Second mortgage loans are different because money is taken money from the assets you’ve built up in your current home. This money will serve as fund for what you desire.
In the past, anyone who used a 2nd mortgage loan was seen as someone in a bad financial condition by lenders and the general public so it was considered a bad thing. Initially this method of securing a loan was seen as an option to people with low income or bad credit. Thankfully that’s not the case now. There’s absolutely no need to bother over what people think because second mortgage loans are a good way to get a loan.
2nd mortgages are attached to your current first mortgages. The worth of your house will be a useful piece of information for the banks or lenders. They want to know how much you still owe on the property. A subtraction will be made on that and the amount left is called equity. This equity is your potential take home in 2nd mortgage. To make this clearer consider this example: if your property is worth $120,000 and you still owe $80,000 you are more likely to get $40,000 from your second mortgage loan. This means that you are actually using the amount of equity you have on your property as collateral.
Also in the past the interest rates on 2nd mortgage loans are higher but now that’s not the case. The demand is so much that they often have lower interest rates than the standard first mortgage loan. Be sure to look carefully from many lenders and banks because loans like this are harder to find and also take time to compare what you are served with the different lenders. This will help you in getting the lowest rates around. Protect your mortgage investment now. Get home insurance free quotes and compare. Where To Start?
By: Iyke Phelim
When to Get a Second Mortgage
December 1st, 2009
If you find yourself struggling to make ends meet, in need of some additional money for home repairs or home improvements, or just find that you have some financial need that you can’t fulfill with your standard wages, you might want to consider taking out a second mortgage on your home. Of course, when many people think of a second mortgage they think of the scenario that’s usually presented in movies and on television of individuals drowning in debt who have had to take out several mortgages simply to stay afloat.
While this may be the case with some individuals, most people who take out a second mortgage do so simply as a means to cover expenses or to begin new projects using a form of collateral that is both high in value and easy to find a lender for. Below is some additional information that will tell you exactly how a second mortgage works and how to get the best deal on your new mortgage that you can.
What is it?
Before you can get a second mortgage, it helps to know exactly what one is. Basically, a second mortgage is a secondary loan that is taken out on an already mortgaged property. This loan is considered to be subordinate to the original mortgage, which means that the lender who issued the loan will only receive their money after the original mortgage has been repaid in the case of a default and the subsequent sale of the property.
Second mortgages are generally considered to be a higher risk than the original mortgage, since the lender which issued the original mortgage has first rights to the property… because of this, interest rates for a second mortgage are usually higher than those for the primary mortgage.
Common Uses
In addition to the examples provided above, there are many common uses for the funds received from a second mortgage. These loans are often used to consolidate multiple debts into a single monthly payment, or they may be used to finance a vacation or moving expenses. Second mortgages are also a common method of securing startup capital for new businesses in lieu of a small business loan, and have also been used as alternative means for financing new vehicles, paying for medical expenses, and other large expenses that might be difficult to pay for out of pocket.
Shopping for the Best Mortgage Rates
In order to make sure that you get the best rate for your second mortgage, it’s important to shop around at different lenders to see who has the better deal. Many second mortgages come from finance companies and mortgage lenders, though you should make sure that you keep your options open… after all, if you decide to ignore certain types of lenders you might miss out on the best rates.
Request loan quotes in much the same manner as you would if you were shopping for a primary mortgage or other loan, getting quotes from a variety of lenders and online lending companies. Take your time and carefully compare both the interest rates that each lender offers and the repayment terms that you’re expected to abide by.
Once you’ve found the second mortgage quote that has the best rates for the terms that they offer, investigate the offer further… there’s a good chance that it will be the loan for you. Verify the terms and rates that are offered, and submit your application; you’re well on your way to getting the money that you need from your new second mortgage.
By: Jerry Warner