For homeowners who want financing in addition to an existing loan, rates for second mortgages are high on the list of things to consider. A second mortgage allows you to borrow money against the equity you’ve built in your home.
Here is some more important information homeowners should know about this type of financing:
What is a second mortgage?
A second mortgage is a lien placed on an asset that already has an existing mortgage. For your house, the second mortgage will function like a home equity loan or home equity line of credit (HELOC).
Just like with your regular mortgage, your loan officer may take possession of your home if you default on the loan.
Second mortgages are often cheaper than cards because of their low rates. You can use your second mortgage money for virtually anything, which makes them a popular choice for handling debt consolidation, home improvements and medical expenses.
How to get a second mortgage
The first step in obtaining a second mortgage is to determine your home’s equity. It’s ideal to have at least 20% equity, so the remaining loan amount doesn’t go over 80% of the home’s total value.
It’s also a good idea to check on your credit report before applying. This gives you a chance to dispute any mistakes or resolve any issues that could affect your ability to qualify for a home equity loan or credit line.
When to apply for financing
There is no hard and fast rule for the best time to get a second mortgage. It’s important to consider every possible factor, including the current interest rate and your financial situation.
Usually, borrowers follow market trends when acquiring the second loan. Mortgage rates can vary, but tracking the trends of the market will allow you to apply and receive a second mortgage when rates are low. You also want to be aware of the various fees charged by mortgage lenders and how they factor in to the total annual percentage rate (APR).
Home equity loans through second mortgages are a great way to capitalize on your home’s equity. They can help you cover expenses unrelated to your home, either through a lump sum loan or HELOC. To find out if a second mortgage will work for you, consult a financial advisor and check with your lender for details.
About the Author
Judy Szablak
With over 30 years in the industry, Realtor Judy Szablak has been on national television for her real estate expertise on the HGTV Network, featured on Martha Stewart Living Radio "Morning Living” , NPR radio as an expert real estate panelist, It’s Relevant News channel, and quoted in the Wall Street Journal for her in depth knowledge of Fairfield County Connecticut real estate.
She was also on the local NPR radio station (WSHU) as a Fairfield County CT real estate expert. Judy has provided multiple online respected news sources with her real estate expertise including The Daily Easton, The Daily Weston, The Daily Fairfield, The Daily Stamford and The Daily Greenwich, as well as in print in the New York Post. She is a weekly Real Estate Columnist for WestportNow.com, another real estate column "Real Estate With Judy” is syndicated through Hearst CT Media Online and seen in The Connecticut Post, The Danbury News-Times, The Stamford Advocate, The Greenwich Time, The Hour, Fairfield Citizen, Westport News, Darien News, New Canaan News and the Wilton Villager.
Judy is also the author of the book, The Art of Buying or Selling a Home, available at all major book retailers. Additionally, Judy has been nationally recognized in a number of national real estate trade magazines, some with distribution to over 1 million members. She was featured in Real Estate Today as early as 1994 for her commitment to, and implementation of technology in real estate. Judy appeared in the Certified Residential Specialist Magazine, as she provided advice on marketing strategies and ethics in the article titled "Marketing Makeovers.”
Judy was also featured in REALTOR® Magazine, regarding image enhancement for Realtors. She was again featured in REALTOR® Magazine, in an article on "Achieving Flow” and operating at optimal peak performance. In another article in the same publication, Judy offered guidance to fellow real estate professionals as she explored the topic of implementing and maintaining personal websites. She has appeared in The Council of Residential Specialists Magazine, which featured her ideas regarding technology. Additionally, Judy authored an article on marketing and technology for the Certified Residential Specialist (CRS) Online Magazine. On two occasions, in 2015 and 2017, she appeared as a featured agent in Top Agent Magazine. I have a few other websites- www.TheCtrealtyBlog.com www.CtHomesAndRealEstate.com www.BestWestportHomes.com www.ThePetitePowerhouse.com www,SzablakConsulting.com
