What is a Second Mortgage, and How Can I Profit From It?
So what is a second mortgage? A second mortgage is a secured loan (or mortgage) that is subordinate to another loan against the same property. More specifically, the second loan in sequence. In real estate, a property can have multiple loans against it. The loan which is registered with county or city registry first is called the first mortgage. The loan registered second is called the second mortgage. A property can have a third or even fourth mortgage, but those are rarer. Second mortgages are called subordinate because, if the loan goes into default, the first mortgage gets paid off first before the second mortgage gets any money. Thus, second mortgages are riskier for the lender, who generally charges a higher interest rate.
How can you benefit from a second mortgage? Well you can use the money gained from the second mortgage to do any number of things. You can put the money toward paying off various debts including credit cards, car loans, boat loans, school loans, or other types of loans. You can use the money to purchase a new car, boat, go on a vacation. Many people use the money to do home remodels…adding on to the existing house, upgrading the kitchen, put in a pool. All these things are very helpful, and it’s up to you to decide what to do with your money.
How do you get a second mortgage? You get a second mortgage first by owning a house. If you don’t own a house, you won’t be able to get a second mortgage. If you have equity in your house, i.e. your house is worth more than you own on your first mortgage. You can get a second mortgage. In many cases you can get a second mortgage up to the value of the house. The best thing to do when getting a second mortgage is to get quotes. Quotes offer you the ability to “window shop” various rates. With a better rate, you will save more money on your second mortgage. Many quotes are good faith estimates and don’t require a credit check. If you like what a lender is offering in terms of rate and packages, you can choose to go with a lender at which time they will run your credit and tailor the loan package specifically for you.
Where can I get a rate quote? There are lots of places to get a rate quote. Local banks, lending companies, even online there are tons of sites that offer rate quotes. Although be warned…some sites out there will sell your information…so be sure to read the privacy policy before you fill in your information. One great place to get information on quotes and second mortgages is www mortgage refinance second.com. They offer some good advice and even offer rate quotes. But by shopping around for rate quotes, you will greatly magnify the possibility of getting a great deal and it will save you tons of money.
By: Tim Smith
Benefits Of A Second Mortgage
Many people have heard the term second mortgage used in reference to a loan on a home.
What does the term “second mortgage” really mean? As far as real estate is concerned, a single piece of property can have multiple loans, or mortgages against it.
The loan that is first registered with the county or city is known as the first mortgage. The loan that is registered second is known as the second mortgage.
This has many benefits over a normal bank loan.
There can be as many mortgages on a property as there are lenders willing to provide funds.
If a loan happens to go into default, the loans are repaid in the order they were registered.
So, the first mortgage is paid first, the second mortgage is paid second, and so on. Because of this, subsequent mortgages are more of a risk for the lender.
In exchange for assuming the risk of lending a second mortgage, lenders often charge higher interest rates.
In many cases, the second mortgage has a shorter term than that of the first mortgage. Also present with many second mortgages are fixed amortization schedules and balloon payments.
Homeowners have many reasons for taking out a second mortgage. Some of the most common reasons are for home improvement, increasing cash, paying off other debts, or investing in a business.
In some cases, the second mortgage is used as a down payment for the first mortgage when the home is purchased.
When you are choosing a lender for a second mortgage, you will use many of the same considerations that came into play for your first mortgage.
The interest rate, repayment terms, and fees associated with the second mortgage are some of the primary factors that might cause you to choose one lender over another.
The repayment terms are another factor that you should use to determine a lender for a second mortgage.
Some second mortgage loans can be repaid in as much as 15 or 20 years. However, some loans must be repaid within a year.
Generally, the shorter the repayment period on the second mortgage, the higher the monthly payments will be. You should choose a loan with repayment schedule that falls in line with your ability to repay.
To obtain the loan, you will usually have to pay a fee that is a percentage of the loan. Your lender may refer to this percentage as “points”.
One point is equivalent to one percent of the amount that you borrow. Therefore, if you borrow $10,000 with five points as the fee, then you would pay $500 (5%) in points.
The number of points changed will vary by lender. This is where shopping around will pay off for you.
In some states, there is a limit to the amount of points a lender can charge for a second mortgage.
Check with a banking commissioner or state consumer protection office to find out if there is such a limit in your state.
Make certain that you get the amount of the fee in writing from the lender before taking the loan.
By: Gerald Mason
Ways to Make it Easier to Get Your Second Home Mortgage
If you are thinking of buying a second home now, the obvious place to buy it is in the UK. With the pound falling steadily against the euro, second homes on the continent have become vastly more expensive. And with airlines being hit by the spiralling cost of fuel, having your second home in the UK makes even more sense.
What’s more, with house prices falling, this is a really good time to go for your second home. The only snag is that mortgages are harder to get. So how are you going to finance your second home?
Well, there are ways to make it easier to get your second home mortgage.
A second home mortgage is a mortgage on a property that is not your main residence. The lender will look at all your outgoings, and will look at any debts secured on your main residence, before deciding whether to grant the mortgage. If you have no mortgage on your main residence it will make it easier to get the second home mortgage – you have a lot more security to offer.
Even in these days of credit crunch there are still a good supply of mortgages available for those who can put down a sizeable deposit – i.e. who are looking for a low loan-to-value ratio mortgage. If you can release equity from your main home to provide a substantial deposit on your second home, you shouldn’t have a problem getting your second home mortgage.
If you plan to let out the house as a business and not to live in it yourself, you will have to apply for a different type of mortgage – a buy to let mortgage or a holiday let mortgage. However, even if you do want to use it yourself, you may still want to let it out sometimes to help with the finances. If you do, you must ensure that this is permissible under the terms of the mortgage. But it does make sense, both to prevent it from standing empty for too long and to help you afford your second home mortgage. (Remember that tax is payable on rental income, at your normal tax rate, but the interest element of your second home mortgage repayment is deductible for tax purposes.)
It will be easier to afford your second home mortgage if you go for an interest-only rather than a repayment mortgage. However you do need to have a clear plan for repaying the capital at the end of the mortgage term. These days you can’t rely on the house having appreciated in value, so you can’t count on selling it at a profit. Of course, if the idea is eventually to use it as your retirement home, you should be able to repay it through the sale of your main house.
There is no denying that mortgages of most kinds are harder to obtain at the moment. However, you can still obtain a second home mortgage provided the lender is satisfied there is minimum risk. The more you can demonstrate your ability to afford it, the easier you should find it to obtain a loan.
By: SeanHorton