What is a Second Mortgage?
Do you want to take a second mortgage on your home?
Before you sign the application form, here are things you need to know about a second mortgage.
Second mortgage is a good option for those who want to pay for emergency expenses, pay off bad debts and adjust their financial obligations. It is sometimes called, “home equity loan”, because you are simply borrowing the amount of equity that you have in your home.
Home equity refers to how much of the home you actually paid for, versus the amount that is mortgaged. For example, if your house is valued at $450,000 and you owe $200,000 to a lender, your equity in the property is $250,000. That is the maximum amount you could borrow on your second mortgage.
Should I apply to the original mortgage company or to a second lender?
It depends. If the mortgage company that holds your existing mortgage is willing to extend a second mortgage on your property under favorable terms, and you met the eligibility requirements, why not? There would be less paperwork because they already hold the lien on your home. However, if you want to avail of our non-stressful second mortgage loan, our team of experts can help you throughout the process. We have excellent customer service and our team ensures that you enjoy our professional, flexible and friendly service.
Factors to consider when applying for second mortgage
- Financial status
Before you take out a loan, make sure you have the financial capability to repay it. Compute your living expenses, existing debts and other financial obligations against your income. Make sure that you have adequate source of income to pay back the second mortgage.
- Associated costs
Second mortgage often comes with closing costs and additional fees such as home appraisal, application fee, documentation processing and other related costs. Talk to your lender about the possibility of waiving closing costs and other fees.
Keep in mind that the interest rate is probably higher than your existing mortgage; so be sure to shop around and get the best terms that you can. Your second mortgage does not have to be the same lender as your current mortgage. NSW Mortgage Corp is a good place to start. We have reasonable rates and terms than other types of lenders
Here are factors that affect the cost of second mortgage:
- interest rates
- length of the loan term
- monthly payments
- penalties for missed payments
How can I get a higher amount of second mortgage loan?
The best way to get a higher loan is to increase your home equity, since it is the basis of your loan. While the real estate market can quickly build up your equity, it is not reliable. It may fluctuate anytime. So, it is advisable to do it by yourself.
Pay your mortgage on time. The principal of the loan builds your home equity and you also avoid paying additional interest for delayed payments. You can also double your payments to build your equity faster.
Making home improvements also increases the value of your house and eventually increases your equity. Don’t forget to conduct routine maintenance, renovations and simple additions that can boost your equity.
Contact us today and we will assist you in the best way that we can to get the most favorable terms for your second mortgage.