Posts Tagged ‘second home mortgages’
Second Mortgages
A second mortgage is an additional loan taken against a property. The first mortgage must be paid off first, thats why lenders consider second mortgages riskier. Therefore they typically charge higher interest rates and points for the transaction.
You can use your second mortgage for the same purposes as a regular mortgage. A closed end type home equity loan gives you a big chunk of money immediately and you cant get another loan until this one is fully paid. Although there are a lot of different second mortgage forms, only the terms and conditions will vary.
The amount of money you earn, the amount of money your home is worth and the way your credit history looks are the most important factors in deter mining the second mortgage sum you can get. So, theres not much difference with a regular mortgage.
When you refinance a first mortgage, you’re essentially renegotiating the terms of the first loan. A second mortgage, on the other hand, involves borrowing against the equity you’ve already up built up in your property.
Be aware though, usually your regular house loan is concidered as being a lot saver than a second loan on your house. Therefore, usually you will have to pay more for this last one. This all makes sense perfectly because the risk that you can’t afford two mortgages at a given moment is bigger than when you just have to pay for one.
It is also possible to get a second mortgage loan for an higher amount of money then your house is worth. For these types of mortgages you will generally need a good credit history and a good financial position so the risks are as minimal as possible.
It is possible to take out third mortgages (and more). However, since interest rates and penalties tend to get steeper as you put more and more stress on your equity and mortgage, most individuals opt for alternative financing plans.
In terms of whether you should take a second mortgage or refinance your first, there is no one-size-fits-all answer. Analyze your interest rates, consumer debt, long-term financial picture, and equity savings before going with one or the other.
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