TOP 5 Issues You Need to Know about Second Mortgages

TOP 5 Issues You Need to Know about Second Mortgages 24 Second mortgages are ideally loans secured against a home that is already mortgaged. While it's easy to be tempted into second mortgages, borrowers are advised to be careful not to get trapped in two loans, especially if you're already struggling to repay the first one. That said, here are the top 5 issues about second mortgages that every intending borrower needs to know; Second mortgages come with inflated interest rates Assuming that a homeowner has only repaid part of the first loan used to acquire the home, in the event of a default, the second mortgage can only be repaid after the first loan has been settled. This alone poses a big risk to the second lender and, often results in slightly higher interest rates. 2. You're putting your home on the line By taking a second mortgage against your home, you agree that if you fail to repay the loan as agreed, the lender can force you out of your home. For this reason, homeowners are encouraged to consider their options wisely and only take a second mortgage when it is absolutely necessary. 3. Second loans are associated with numerous fees/charges Most mortgages have fee/charges that have to be paid by homeowners before or during application. These charges involved are too high and might make the whole process very expensive. 4. Loan amount Lenders look at several factors before a second mortgage application can be approved. The homeowner should have a significant equity from the first loan Solid employment history Income versus debt/expenditure This can be achieved by renovating the house. Without a significant equity the second loan Expenditures typically include insurance and other bills. Generally, the debt to income ratio should be low for one to qualify for a second mortgage. Often, borrowers with one or two employers over several years are usually are more likely to get a second mortgage. may not be granted. 5 The purpose for the loan As mentioned earlier, the purpose of the mortgage should be productive. Two proposals that will attract a second mortgage effortlessly include; A debt that might as well be Settling another debt accumulating interest can be settled. This increases the value of the Renovating and finishing up the house property, hence the homeowner is increasing his equity. Do not take out a second mortgage to purchase a car. While buying a car is another thoughtful investment, you can always get cheaper auto loans from the many lenders spread all over. What to consider when shopping for a second mortgage TERM - This is the period for paying back the loan. The shorter the term, the less interest you pay and the faster you gain home equity. CREDIT SCORE The amount you can be given depends largely on your income and credit Score. SHOP AROUND- - RATES VS CLOSING COSTS Compare the different rates offered by different lending institutions. Getting help from a financial adviser on the different home equity loans can help you find the best rates available. A loan can have a lower interest rate but higher closing costs. It will end up being more expensive. Source- MORTGAGE CENTRAL http://www.mortgagecwf.com/ 866-342-5099 - Second Mortgages in Toronto Broker License: 10841