If you want to quickly improve your finances and get your hands on cash for a particular purpose, getting a home second mortgage can be just the right thing for you. Even people with bad credit can put their hopes on a second mortgage as it is not only easy to obtain, but is also available on lower interest rates than an unsecured loan or a cash advance on a credit card.
Instead of refinancing your first mortgage to get a higher sum, you can borrow out a smaller second mortgage. So a second mortgage is actually another mortgage on your home, leaving you with two mortgages. There can be many reasons for getting a second mortgage, but there are some that stand a better chance in the loan application. They’re- Home remodeling, Home improvements, education, medical emergency, reliable investments, care for dependants and transportation.
The advantage of getting a second mortgage is that the interest rate and the repayment schedule may be more favorable than that on refinancing your existing first mortgage. If you are behind on bills, a second mortgage with lower monthly payments can be a great option. Even if you have bad credit, there are adverse credit mortgage lenders who will offer a second mortgage on your home. The lender would look for good equity in your home before loaning you the money. If you have reasonable amount of equity in your home, search for a home equity loan option, as these lenders may be eager to set you up with a new mortgage.
On the other hand, a second mortgage puts a second charge on your home. So even if you pay the first mortgage and fail to pay for the smaller second mortgage, the lender can seize your home. Keeping all these pros and cons in mind, one can prudently decide on getting a home second mortgage among other options, to keep the monthly obligations at the bare minimal.
Thursday, December 31, 2009
Tuesday, December 8, 2009
The bad part about Home Second Mortgages!
How to Use a Home Second Mortgage
Why would somebody risk their home with a home second mortgage? These types of loans are appropriate for times when you need a lot of money. You may not have unlimited credit on your credit cards, and finding the cash just lying around is difficult.
Where is there a lot of equity or value? In the home. By borrowing against a home, borrowers can get bigger loans. In addition, second mortgages may allow for bigger loans because the lender considers a loan against the home to be safer.
Some common uses for second mortgages are:
• Home improvements
• Avoiding Private Mortgage Insurance (PMI)
• Debt Consolidation Programs
• Purchasing additional homes
• Creating a home equity line of credit (HELOC)
Most people use home second mortgages for other uses – and sometimes they are not wise uses. It can be tempting to tap a large source of money with a home second mortgage, but you have to remember that you’re borrowing against your home. In some cases, a home second mortgage is the only way to pay for a need.
Disadvantages of Home Second Mortgages
The main disadvantage with home second mortgages is that you are risking your home by using one. This is a serious risk: if you can’t pay the loan back, a home second mortgage can be catastrophic. Make sure that your intended use of funds is worth the risk you’re taking by using a second mortgage.
One of the drawbacks is that home second mortgages have slightly higher rates than senior mortgage rates. Its because the second mortgage won’t be paid until the first one is (in the event of a default). Because the loan is riskier than a plain mortgage, the rate is higher. One the other hand, the rate may be lower than alternative sources like credit cards.
Finally, you will have to pay hefty second mortgage fees. There are a lot of hoops to jump through and services to pay for. Depending on how much you need and how long you’ll need it, a home second mortgage may not work simply because of the fees.
Why would somebody risk their home with a home second mortgage? These types of loans are appropriate for times when you need a lot of money. You may not have unlimited credit on your credit cards, and finding the cash just lying around is difficult.
Where is there a lot of equity or value? In the home. By borrowing against a home, borrowers can get bigger loans. In addition, second mortgages may allow for bigger loans because the lender considers a loan against the home to be safer.
Some common uses for second mortgages are:
• Home improvements
• Avoiding Private Mortgage Insurance (PMI)
• Debt Consolidation Programs
• Purchasing additional homes
• Creating a home equity line of credit (HELOC)
Most people use home second mortgages for other uses – and sometimes they are not wise uses. It can be tempting to tap a large source of money with a home second mortgage, but you have to remember that you’re borrowing against your home. In some cases, a home second mortgage is the only way to pay for a need.
Disadvantages of Home Second Mortgages
The main disadvantage with home second mortgages is that you are risking your home by using one. This is a serious risk: if you can’t pay the loan back, a home second mortgage can be catastrophic. Make sure that your intended use of funds is worth the risk you’re taking by using a second mortgage.
One of the drawbacks is that home second mortgages have slightly higher rates than senior mortgage rates. Its because the second mortgage won’t be paid until the first one is (in the event of a default). Because the loan is riskier than a plain mortgage, the rate is higher. One the other hand, the rate may be lower than alternative sources like credit cards.
Finally, you will have to pay hefty second mortgage fees. There are a lot of hoops to jump through and services to pay for. Depending on how much you need and how long you’ll need it, a home second mortgage may not work simply because of the fees.
Thursday, December 3, 2009
Home Second Mortgage Q & A Part1
Well i noticed out of all of the questions asked these 2 seem to come up more frequent then others, so i decided that I will answer them now before their asked!
So how much can I burrow for my Second Mortgage?
Home second mortgage allows you to borrow on the basis of your home equity. The equity is the differentiation between the recent appraised value of your home and the total you have paid towards the first mortgage.
In most cases lenders let you can take a second loan such that the total loan-to-value ratio of your first and second loan is equal to 85% of the home's appraised value. On the other hand, there are lenders in almost all states excepting Texas and West Virginia who allow you to take out second mortgages equal to 125% of the appraised value.
What happens to my home second mortgage if I refinanced the first one?
When you refinance the first loan after getting the home second mortgage, it would be a good idea to request a subordination from your lender for a of the second mortgage. This implies that your second home mortgage will be measured as a junior lien compared to that of the refinance loan. If not, if you do not subordinate it, the second mortgage will be taken as the first lien and the refinance loan will take over the second lien position. For this situation there will be less of a hazard with the second loan but higher risk involved with the refinance as a result of which the first mortgage refinance will cost you more in interest charges.
With a home second mortgage, you get the chance to tap a large sum of money. In addition, you will be able to deduct the interest on your taxes up to a certain limit. Be sure not to overlook the costs and the high interest rate associated with a second loan. If you happen to default on the second loan, it’s a good chance you may lose your home. Therefore, prior to going for a home second mortgage, it is best to think out a good budget and find out how much you can afford to pay in addition to the first loan.
So how much can I burrow for my Second Mortgage?
Home second mortgage allows you to borrow on the basis of your home equity. The equity is the differentiation between the recent appraised value of your home and the total you have paid towards the first mortgage.
In most cases lenders let you can take a second loan such that the total loan-to-value ratio of your first and second loan is equal to 85% of the home's appraised value. On the other hand, there are lenders in almost all states excepting Texas and West Virginia who allow you to take out second mortgages equal to 125% of the appraised value.
What happens to my home second mortgage if I refinanced the first one?
When you refinance the first loan after getting the home second mortgage, it would be a good idea to request a subordination from your lender for a of the second mortgage. This implies that your second home mortgage will be measured as a junior lien compared to that of the refinance loan. If not, if you do not subordinate it, the second mortgage will be taken as the first lien and the refinance loan will take over the second lien position. For this situation there will be less of a hazard with the second loan but higher risk involved with the refinance as a result of which the first mortgage refinance will cost you more in interest charges.
With a home second mortgage, you get the chance to tap a large sum of money. In addition, you will be able to deduct the interest on your taxes up to a certain limit. Be sure not to overlook the costs and the high interest rate associated with a second loan. If you happen to default on the second loan, it’s a good chance you may lose your home. Therefore, prior to going for a home second mortgage, it is best to think out a good budget and find out how much you can afford to pay in addition to the first loan.
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