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.