When You Should Consider a Second Mortgage?
With the variety of loans available today, you know there is going to be the perfect one for you. A second mortgage is set up to help those in many different situations, but if it suits you and your financial obligations, it could make all the difference.
What is a Second Mortgage?
A second mortgage has been called a piggyback mortgage, because it takes a second lien on the house or property. A second mortgage is just what the name implies, it is a second loan on a home with a mortgage already. This type of mortgage is when you borrow against the value of your home. You still need to apply for this loan. Second mortgages can be very helpful when you use them to pay off debt. A second mortgage is not a remortgage, secured loan, or a second charge mortgage.
- Line of Credit: One type of second mortgage borrows money from a line of credit. You don’t have to take out money, but the option is there if you need it. There is a maximum borrowing limit, and you can borrow and repay up to that limit.
- Lump Sum: This is a standard type of second mortgage where there is a home equity loan given in a one-time lump sum of money. It can be used for whatever you need. You repay the loan over time with set monthly payments.
Why A Second Mortgage May Be For You
Many people look for a second mortgage to pay off financial obligations. If you need to pay off other loans and debts, pay for college tuition, fund a much-needed home renovation, or make a large necessary personal purchase, a second mortgage could be the right choice for you. Other uses for a second mortgage are paying off student loans, credit cards, and medical bills. There are renovations that come up and just cost more than what we can afford. A second mortgage could get you the funds needed to fix your house. Sometimes you need to make an immediate personal purchase, but no one is judging you to see if it is the best reason to get a second mortgage. This is just a loan that works for certain people in these circumstances. Most people who look at this type of loan like the idea of the lower interest, more time to repay debts, and the interest payments are tax-deductible.
You can use a second mortgage to pay off debt, by borrowing equity to pay off the debt. If your debt is spread out over several different payments, the second mortgage can bring it all together into one, lower payment. A second mortgage is often used to help with credit card debt, and is also often used to afford or pay off other obligations such as renovations or education tuition. Second mortgages usually close in a few weeks, but can take up to a month.
When is a Good Time to get a Second Mortgage?
There is no waiting time when considering a second mortgage. You just need equity and lenders want to know how much equity you have in your current home, as well as the amount of debt you are have. As long as you have equity and can make regular payments, considering a second mortgage can be a good plan. Second mortgages can bring lower interest rates, tax benefits and high loan amounts.
Consider the advantages of a Second Mortgage.
- Tax benefits:: There are opportunities to have a mortgage interest deduction for interest paid on your second mortgage. If you have someone doing your taxes, make sure they know of the technicalities there are for this. The Tax cuts and Jobs Act doesn’t have the deduction unless you used the money for home improvements.
- Loan amounts: A second mortgage allows you to borrow larger amounts because you are using your home as collateral. For some loans, you can borrow 85% of the value of your home.
- Interest rates: : This type of loan often has lower interest rates then other loans. By securing your loan with your home, it is less risky for your lender.
Things to Keep in Mind
There are a few things to keep in mind when getting a second mortgage. Remember, a second mortgage is a loan, the funds need to be paid back in set payments. The second mortgage is also tied to your home. If you don’t pay the money back or miss payments, you can lose your home. It is also good to know, if you use the loan to pay off debt, there is a chance it could hurt your credit score. There is a chance you could also end up paying a bit more in the end, but you just need to figure out if it is work it. Second mortgages can go on for 25 years.
What do you Need to qualify for A Second Mortgage?
When getting a second mortgage, you will need information on your income, equity, property and credit score. Equity is important to have so you have a better chance of qualifying for a second mortgage. If you can show you make regular payments towards utilities, that will help you qualify as well. This is because lenders want to see if your source of income is reliable enough for you to make steady payments on the loan. Having a high credit score also helps your chances of securing a second mortgage. It will also cause your interest rates to be lower.
Why Should You Use a Mortgage Broker for your Second Mortgage?
Mortgage brokers have expert resources to find the right lenders, banks, insurance companies, trust companies, and private funding to get the right mortgage for your financial situation. Brokers have access to better rates, and more access to loans. Mortgage brokers are trained to help all people, even those with poor credit. They have the experience, knowledge and contacts to get better loan options. Mortgage brokers are usually smaller institutions than banks, which allows them to give you more flexible, personal service, and other options. Overall, mortgage brokers will save you time and energy. You only need to fill out one application with a broker, and then the broker take it from there.
You shouldn’t have to worry about if you can get a second mortgage, plan on when can get that second mortgage. With Matrix Mortgage Global, qualifying is quick and easy. If you have any further questions about second mortgages and your financial situation, please contact us.