What Is A Second Mortgage?
A Second Mortgage is a loan using your house as collateral. It is also known as a Home Equity Loan or a Home Equity Line of Credit (HELOC). These types of loans are a very good idea if you need cash and don’t want to take out a personal loan. Personal loans usually come with MUCH higher interest rates. Your home is your collateral, so remember that as if you default on the loan, you will lose your house.
It is a smart idea to be acutely aware of all of your options before you decide on what type of loan you need. The next important move for you to make is deciding on which company to seek out the loan. Even though their marketing campaigns will show them as a fully trustable company, you need to do your homework first, so you don’t get into something you will deeply regret later. We’ve done the homework for you and given you a short list of companies. Check them out, and see which one “meshes” best with your needs.
Best Second Mortgage Lenders
|Quicken Loans||Quicken Loans is a great company. They have so many programs to choose from that consumers are sure to find what they need. With the great service and easy to use website, it’s no wonder the company has remained stable, even in this unstable economy.||Rating: Good|
|Mortgage Loan||MortgageLoan.com won’t be able to actually give you the loan to refinance your home, but they can provide you with refinancing rates, a refinance calculator, and information on how to know whether refinancing is the right choice for you. Their information is very consumer-friendly, making the site easy to use. Also, they are very open with information, and their customer service is outstanding.|
How To Select The Best Company for a Second Mortgage
Getting a second mortgage is not going to be nearly as confusing or intimidating as getting your first mortgage. The process will be much simpler, mostly due to the fact that you’ve already been through the experience of getting a mortgage before. To find a second mortgage company, you have a few different options to choose from. For starters, you can use the company that provided your first mortgage, so long as you are eligible for another loan and you were happy with the service you received. Whether you liked the company that serviced your first mortgage or not, you can always consult a mortgage broker or search the internet to see if you can find a better company or perhaps just a better loan program for your second mortgage. If you are looking for a second mortgage, you already know that your interest rate will depend fully on your credit score and credit history. However, what you might not know is that getting a second mortgage will also depend on whether you are selling your first home or simply refinancing it, or even if you’re keeping your first home and buying a brand new one. Most people who get a second mortgage do so after they have paid off their home. They take out a second mortgage on their home so that they can use the equity in the home to fund whatever financial needs they may have. Many companies offer great programs for second mortgages, and choosing the right one for you will probably be more of a matter of personal choice than anything else. All you need to do is compare the loan programs, the companies in question, and the mortgages that you are offered. Getting a second mortgage doesn’t have to be difficult, and it shouldn’t be, as long as you are informed and prepared for the process.
What Are The Different Types of Second Mortgages
There are three types of second mortgages. They are:
- Home Equity Loan
- Home Equity Line of Credit (HELOC)
- Piggyback Loans
Which loan is best for you? It depends on your circumstances and your financial needs.
- Home Equity Loans: This type of loan is generally associated with a second mortgage. The repayment period for this kind of loan is usually 5-15 years. The interest rate will be better than most loans, but typically higher than first mortgage rates. Since you are borrowing against the equity in your home, this is based upon simple math of what your home is worth and how much you owe on it, not taking into account the amount you have paid. For example, if you bought your home for $200,000, and you owe $182,000, instead of getting just $18,000 for your home equity, the second mortgage company will have your home reappraised. Let’s say the new appraisal value comes in at $242,000. You can now borrow up to $60,000 on your second mortgage.
- Home Equity Line of Credit (HELOC): This type of loan is similar to the home equity or second mortgage, but instead of getting the cash all upfront, you have access to it over a predetermined period, so you take it as you need it. This allows you only to use what you need so you avoid paying interest on money that you don’t require now, but may need down the road. Look at it as a credit card, but with a much lower interest rate.
- Piggyback Loans: These types of loans are generally for getting into a home initially. Often you want to get a home, but the price is a little out of your range. So you get as much as you can with the primary mortgage and the rest of financed through a piggy back loan and your down payment. This way you are not paying for private mortgage insurance (PMI) which can really increase your monthly loan payment. You are required to have PMI if your down payment is less than 20%. You are also avoiding taking out what is referred to as a “Jumbo Loan” which carries a higher interest rates and less flexibility.
What Are The Downsides of a Second Mortgage?
The biggest downside is you may lose your home. Most think, incorrectly, that if they keep up on their first mortgage, and default on their second mortgage, that they can keep their home. This is not the case. Many people have been foreclosed on in this scenario. Also, having a second mortgage could limit your options should you want to refinance your primary mortgage in the future.
Common Questions About Second Mortgages Answered Here
Q: How Do You Get a Second Mortgage?
This type of loan uses the equity you have in your home to give you the cash you need at a lower interest rate since you are using your home as collateral. You can obtain a second mortgage through a bank or a lending institution. The paperwork is often not as lengthy as the paperwork for a primary mortgage
Q: Can You Refinance a Second Mortgage?
While you can do it, it isn’t as easy as with a primary mortgage.The key factors is if your credit is good and your income has been consistent for a long period of time. There is nothing more attractive to a lender than consistency. Consistent credit, consistent income and consistent mortgage payments. Always compare rates and terms when looking to refinance a first or a second mortgage.