Second Mortgage – How to Get It?
A second mortgage is also known as a home equity loan. That means that you borrow money against the equity (the money you have already paid into repaying your loan) in your mortgage. To prepare to apply for an equity loan, have a clear goal in mind. Be sure that you can afford the payments you must make on this second mortgage, as it is separate from your original mortgage.
You will need to have your home appraised so the lender will know your home’s current value. Think about fees and closing costs. Be careful that you use only trustworthy lenders and make sure that you understand the terms of your loan so the opportunity doesn’t turn into a nightmare.
Home Equity Loan and Second Mortgage
To get a home equity loan, you must have some equity. If you have more than 20% of the value of your home in equity, you have enough to get a good second mortgage. Please note that the value of your home is what the appraiser says the current value of your home is, not what you bought the home for.
If you don’t have at least 20% equity, you can still get a second mortgage, but you may be required to have private mortgage insurance. This may render a second mortgage useless due to the extra cost. If you have lots of equity, you should have no trouble acquiring the money you need.
The next step in getting a second mortgage is to shop around. With so many great offers, like no fees or closing costs, not to mention extremely low interest rates, you should look around for the deals you can get. Looking online is your best bet for finding both a loan to suit your needs and great promotions. Make sure you look at reputable sites. Check a lender rating web site to find trustworthy companies. There are some pretty unbelievable offers available, but don’t believe everything you see.
Second Mortgage Application
Finally, apply and pick out the loan you want. Read all the fine print and educate yourself about anything you don’t understand. Little things like prepayment penalties don’t sound like a big deal, but can lock you into something you didn’t even know you were getting into. Second Mortgages often require insurance or higher interest rates because they are higher risk. Home equity loans are essentially another loan on top of all other debt. So make sure that the loan is on terms you can accept.
The siren’s call of getting some monetary benefit out of what you have already paid on your mortgage before you have finished paying for it is almost impossible to ignore. The possibilities are endless. But take great care and make sure you understand that this is just another loan.
It is two loans to pay on instead of one. It can also be very worth it. You might increase the value of your home by using the money to make improvements. There are undeniable pros and cons so think through it and make sound financial decisions.