A second mortgage is a loan that allows you to borrow against the cost of your property. Your property is an asset that gains value over time and so, second mortgages, which can be home equity lines of credit (HELOCs) or home equity loans help to use that asset for other accomplishments without having to sell your house. They are loans secured by a property in addition to the major mortgage.
To qualify for a second mortgage, you have to submit an application to the lender and provide documentation including your income, debts, and others.
An appraiser will have to examine your home’s value and determine if you have enough worth in your home to convince a lender.
FORMS OF the SECOND MORTGAGE
- A lump sum is a single payment made at a particular time, as opposed to a number of smaller payments or installments. Second mortgages provide a lump sum that you can use whenever you wish. This type of loan can be paid gradually, usually a monthly payment. With each payment, you will be able to pay by spreading out your own in a series of fixed payments.
- A line of credit is a supply of money that you can borrow from whenever you need. It works like a credit card, you get a maximum borrowing limit which is set by your lender.
You can choose what type of loan you would rather use and it may come with a fixed interest rate or a variable-rate loan.
DO SECOND MORTGAGES HAVE BENEFITS?
Yes, they do. Second mortgages enable you to borrow large amounts when needed. You do not have to use your home as collateral because this type of loan is already secured by your home. Your lender will determine the maximum amount you can borrow and it may be a great percentage of your home value.
Unlike other types of debt, second mortgages often have significantly lower interests. Protecting your loan with your property assists you because there is lessee risk for your lender and this can lead to lower rates on second mortgages.