9.26.2018

Tips for Getting a Second Mortgage

 


 


Taking a second mortgage on your property is a relatively common way to get a
loan. It is a risky financial decision to make, but in the end, you may not have
options. Also, if you’re able to pay off the mortgage, it’s perfectly fine to use your
home to obtain one.
It’s also a good idea to use your credit history and equity to make sure you know
how much you can get on the house and plan your financial affairs accordingly.

Understanding the risk

There are a few risks when you take out a second mortgage and you need to
consider them before making a call. The first and most obvious one is the fact that
your monthly expenses will increase significantly. Make sure that you can handle it
before making the call to take up a mortgage.
Have in mind that there are long-term risks as well. Your home is on the line if you
can’t make the payments and if you‘re able to pay them at the moment, there’s really
no guarantee that you could do so in the years to come.

What kind of mortgage?

It’s important to choose the 2nd mortgage that best suits your needs . This depends
on why you need the money and how you plan to use it. One of the ways to go about
it is to get a home equity line of credit. That means that you don’t withdraw all the
money right away, but use it only when you need to and repay the money you’ve
borrowed.
Another option is to simply take out a loan based on home equity. That’s a
traditional loan where you use all the assets right away.

Determine the equity
The next step is to determine the equity you have in your home because that will
determine the value of the mortgage. The equity is the difference between the value
of the home and the debt you already have tied to it.
The first part of it is rather easy. You already know how much you owe and there’s
no way of lowering that number, but by paying what you owe. The second part,
determining the value of the home takes a while and it needs to be done by the
bank-approved appraiser.

Shop around

Finding the best deal on your mortgage, works just like finding the best deal on
everything else. If you shop around with a few banks, you’ll probably be able to get a
better deal than you’ve initially planned to. Start with the bank you already have a
relationship with because that’s probably where you’ll get a good rate.
Have in mind that a bank with the best rate isn’t always the best way to go. There
are others fees and considerations to be made beyond the amount you need to pay.

The type of rates
The type of the rate is often more important than the scale of the rate. There are two
main types of rates to consider. There are fixed and adjustable rates and they both
have their advantages as well as drawbacks. An adjustable rate fluctuates based on
the market, while fixed one doesn’t.

When it comes to adjustable rates, it’s best to investigate how the market fluctuated
in the last couple of years so you know what to expect in the years to come.
Getting a second mortgage can be a good financial decision. However, as is the case
with any other loan, it’s a long-term commitment and it needs to be planned.

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