A second mortgage is a second loan taken on a home where a current mortgage is in place behind your first mortgage. This type of loan is commonly called a home equity loan.
To get one, you need to have equity in your home, which means you need to have a home where the value of the property is higher than the amount of money you owe on the home through your current mortgage. If you have this, you may be able to qualify for a second loan.
How do you get a 2nd mortgage?
Here is a quick explanation of how a second mortgage works. If you own a home that is appraised at $200,000, for example, and you currently have a mortgage on the home where you still owe $140,000, you have up to $60,000 worth of equity in your home. You may potentially be able to borrow from that $60,000 through a second mortgage.
Here are some facts about these loans:
- This is a second secured mortgage. If you default on this second loan, you could lose your home because of doing so.
- You can use the money from a secured loan for anything you need to, including consolidating debt, doing home improvement or even taking a dream vacation. However, keep in mind that you are putting your home under more debt to do so.
- The interest rate on a second mortgage is generally lower than on unsecured loans, such as credit cards and personal loans. The repayment terms are often affordable. It is because of these factors that many people turn to second mortgages instead of getting a credit card out to make that expensive purchase.
- You will need to qualify as you would any other loan. You will need to have a high credit score and have the income available to repay your loan. If you are not employed or have a low credit score, you may not qualify for the loan.
- Most lenders will not give you a loan that would put you at 100 percent of your home’s value. Some lenders require 20 percent of the home’s value to remain in place.
For many people, a second mortgage is an ideal way for you to invest. However, there are limitations and risks. Before borrowing, be sure you are getting the best loan available, with the lowest interest rates. You may also want to consider your ability to repay the loan in a timely fashion as a default on a 2nd mortgage can lead to foreclosure even if you stay current on your first mortgage!
Find out if you qualify for a 2nd mortgage by completing our Quick Online Application today!