In simple terms a 2nd mortgage is popular method of borrowing
a lump sum against the value of your home. Below are the basics
of this type of home equity loan.
It is worth mentioning in this regard that a home equity loan
or second mortgage loans
is an additional loan secured by your home. Theoretically speaking
the second mortgage is considered subordinate to your primary
mortgage. In other word if you default on either loan the 1st
mortgage will be paid off by the sale of your home. On the other
hand any remaining proceeds from the sale will be applied to
the second mortgage.
If experts are to be believed second mortgages typically come
with higher interest rates because there is more risk for the
lender. As a matter of fact you may be required to pay closing
costs and points in order to qualify for the loan.
Point to be noted in this regard is that the second mortgages
are paid in a lump sum and generally come with fixed interest
rates. There is no hiding the fact that this fixed interest
rate is an advantage over a home equity line of credit that
comes with a variable interest rate.
More often than not a second mortgage loans may be a good idea
for homeowners needing a specific sum of money. It is worthwhile
remembering that the added security of a fixed interest rate
makes this option more attractive than a home equity line of
credit in many cases. According to experts to learn more about
your home equity options and how to avoid costly mistakes, register
for a free mortgage guidebook.
On the other hand if you are in the market for a second
mortgage loans you can save yourself a lot of money by
doing your homework first and researching mortgage lenders.
Always remember that it does not matter what you plan to do
with the money; shopping for the best deal on your home equity
loan could save you thousands of dollars. In an ideal scenario
here is what you need to know before you start shopping for
a 2nd mortgage.
First and foremost the term length you choose affects how much
you will pay. The general thumb rule in this regard is that
the shorter your loan term the higher your monthly payments
will be; however, you will pay less in finance charges with
a short term length. In case if you need the smallest monthly
payment for your home equity loan choose a loan with the longest-term
There is no denying that interest rates are an important aspect
to consider. More often than not second mortgages typically
come with fixed interest rates; however, choosing an adjustable
interest rate could get you a lower interest rate, at least
initially. As a matter of fact your credit score will determine
the interest rate you qualify for. Thats why cleaning up your
credit before you apply for a second mortgage can get you a
better interest rate.
According to experts when you take out a second
mortgage loans you will have to pay many of the same fees
you paid when taking out your first mortgage. In addition you
may have to pay application fees, lender fees, title search,
appraisal fees, legal fees, and closing costs to take out your
second mortgage. Because of the simple reason that these fees
vary greatly from one lender to the next you can save yourself
some money by comparing all aspects of loan offers, not just
the interest rates.
In simple terms a second mortgage is a loan that is subordinate
to another loan taken against the same property. It is worth
mentioning in this regard that they are called subordinate in
the sense that if the loan is defaulted, the first loan gets
paid off first before the second one. Always remember that in
such cases of default, any remaining money will be used to pay
off the second mortgage after clearing the first.
Because of this simple reason the second mortgages are therefore
riskier for the lender. Thats why, second mortgage loans have
a higher interest rate. Moreover they also carry closing costs
and points that make them more expensive.
Believe it or not there are different types of second mortgages.
Theoretically speaking in the most common type, the borrower
takes loan for only the actual equity. For example, it is worthwhile
remembering that if a property is valued for $75,000 and if
the owner has availed a first mortgage for $50,000, it is easy
to secure a second mortgage for $25,000.
On the other side of the coin a line-of-credit second mortgage
is another type in which the borrower applies for a loan but
does not avail himself of it immediately. Fact remained that
he can draw the money whenever he needs it.
More often than not a second mortgage is taken at the same time
the borrower secures
the first mortgage. To illustrate this point consider a example
if the borrower wants to obtain a loan that demands a forty
percent down payment and he has only thirty percent, he can
apply for a mortgage for the required ten percent.
Furthermore it is worth pointing that a second
mortgage loans can also be applied for a value that is
more than that of the borrowers property. But fact remained
that these types of loans are riskier for the financiers and
demand greater credit. In addition, the interest may not be
fully tax deductible.
If experts are to be believed a second-mortgage loan is a good
option if you need money urgently. On the other side of the
coin refinancing the first loan could also be a better option,
but it depends on your case. But before that it is of utmost
significance that you beware of the transaction costs when you
decide between a second mortgage and a refinancing option. Nine
out of ten times, consumers does not analyze the transaction
cost as a result budget increases.
1. auto financing
Theoretically speaking owning a vehicle, be it any type including a car is not at all an impediment even as you ...
2. refinancing student loan
There are lots of graduates students out there and they are struggling or harassed with paying or refund for the...
3. government loans
At the present moment when there is so much of hue and cry amongst private loan agencies, each trying to downpla...