Second Mortgages
A 2nd mortgage rate is usually 1 to 1.5 % higher in interest than a first mortgage. Second mortgages are higher-risk loans and usually carry a higher interest rate and a quicker pay off period than first mortgages. Also, the loan amounts on second mortgages are smaller.
Because of the smaller loan amounts, lenders who make first lien mortgages also provide second mortgages to qualified borrowers. If you are considering a second mortgage loan, you should make your first inquiry with the lender who holds your first mortgage, especially if you have a good credit history.
You should always check with several different mortgage lenders to compare loan rates, fees, and points. You will find that the loan rates, fees and points will vary greatly among different lenders. You should make an effort to obtain a home loan that suits your financial needs.
Lenders who offer second mortgages include savings and loan associations, mortgage bankers, and commercial banks. A second mortgage involves many of the same underwriting procedures as a first mortgage loan. These usually include an appraisal of your home, a survey, and a credit check.
The lender who approves your first mortgage loan has the first claim of being paid back and/or repossessing your home if you don't make your monthly payments in accordance with the terms in the mortgage contract.
In any situation, the first mortgage will always be paid off before any second mortgage . A second mortgage is a home equity loan. If you take out a home equity loan, essentially you have taken out a second mortgage on your home. A home equity loan is a gentler term for a second mortgage. A home equity loan is a marketing term that lenders find more attractive to lure borrowers into a second mortgage deal that usually comes with a higher 2nd mortgage rate.
Sometime ago, when homeowners took out a second mortgage loan on their homes, it was a sign that they were either enduring a financial hardship or taking on too much debt. Lenders created the term "home equity loan" so that potential second mortgage borrowers will not feel ashamed or embarrassed about having to take out a second mortgage.
Having to pay two mortgages, with a higher 2nd mortgage rate, can be a monumental expense. You should make a very careful decision before taking on this extra financial obligation. You are at great risk for losing your home if you encounter a financial hardship. For example, if you are faced with falling real estate values and/or prolonged unemployment, you may be forced to sell your house for less than the debt on it or to undergo foreclosure of your home.
However, if you have paid off much of your first mortgage and you have a higher income than you did when you took out the first mortgage, you are in a better financial situation to take on a second mortgage with a higher 2nd mortgage rate.
Most lenders will allow you to get a second mortgage that, in combination with the first, can be up to 100% of the appraised value or sales price (LTV). These 100% LTV loans require excellent credit and have a higher interest rate. The most common second mortgage loan will go as high as 95 % LTV. The pay off period on second mortgages is usually 3 to 15 years. If you are considering a second mortgage or home equity line of credit, call Mortgage Solutions today!
To make your visit to our website a positive one, feel free to take your time looking around or simply fill out our 60 Second Loan Application and someone will contact you shortly.
|
