There are times when home buyers find themselves in a financial bind. They already have a mortgage and maybe they have several other debts that need to be paid. If you find yourself in need of funds to assist you with handling your debt, a second mortgage could be an option for you. There are several things to consider before applying for a second mortgage and once you have decided that this is the option you need, the next step is finding a lender that will provide the loan. Because a second mortgage is much riskier, it is beneficial to do your homework on the subject before applying. OE Mortgage can answer any questions you have about how to obtain a second mortgage and if you are qualified.
The Need for a Second Mortgage
There are several reasons a person may decide that they want to take out a second mortgage. For instance, if they have a lot of unsecured credit card debt and they need to pay it down to take some of the load off of their finances, they may choose to apply for a second mortgage. Also, many people decide to apply for a second mortgage when they are trying to purchase more property or stimulate their business to help them move forward. Maybe they find that their home is in need of improvements or they want to renovate. If this is the case, taking out a second mortgage can actually improve the value of your home. No matter what the reason you find yourself at the point where you feel you need to take out a second mortgage, you will want to make sure that you are financially able to do so.
Types of Second Mortgages
There are two types of second mortgages available. The lump sum you receive is simply called a second mortgage and it is a long term loan based on the value of the home you are purchasing. It is common for those that want to make home improvements and will be determined by the value of the home. The second type of second mortgage is called a home equity line of credit. This type of loan works much like a credit card and the amount you are able to get is determined by the amount of equity you have in your home. Equity is defined as the amount of money you have paid into your first mortgage, or the portion of the home that you own already. When purchasing a home, you do not actually own it until you have paid off your mortgage, so when determining how much equity you have in the home the lender will take into account what you have paid already against what the home is worth.
If you have decided that you need a second mortgage to help you get back to financial stability, you will want to speak with a broker. They can help you determine if the second mortgage is the way to go for what you need. As second mortgages are a much riskier type of loan, you will want to have the means required to by the lender to obtain one.