4 Things You Should Know Before Going for a Second Mortgage

• June 24, 2017

A second mortgage is not designed for everyone, and you should carry out a careful analysis to determine whether you are suitable for one, otherwise, it may turn out to be a source of great financial misery for you. If you were considering an application for a second mortgage, here are some key details you should have about them, which should help you make the right decision as to your approach:

A good way to access any available equity

A second mortgage has always been a great way through which homeowners use to access any available equity on their homes without necessarily breaking the terms they have in place for their first mortgages. It helps you to avoid any potential payout penalties, which may be attached to the first mortgage.

The two types of second mortgages

Basically there are two types of second mortgages. These include a Home Equity Line of Credit, which is issued by a second mortgage after the first mortgage and a second mortgage, which is considered a separate loan on the same property. The home equity line of credit is normally limiting because you can secure only up to 65% of your home’s value, and it comes with very strict qualifying requirements.

Private lenders have lower qualifying guidelines

If you are having difficulty securing a loan from the lender you obtained the first mortgage from, you can always consider private mortgage professionals who are known to have looser qualifying requirements when compared to mainstream lenders. With their help, many people who were unable to get 2^nd mortgages due to the tough qualification process, can now access mortgages, though they tend to be very selective regarding the properties they choose to secure mortgages.

Works better as a short term financial solution

Second mortgages are highly recommended as short term financial solutions. This is due to the fact that they come with very high interest rates as well as large penalties and fees, which may be imposed, should something go wrong somewhere along the line.