Some people may find themselves in a position where they need money, maybe to cover repairs on their home or even to send their child to college. Whatever the reason, a second mortgage could be the answer to your financial problems. There are several things to consider when deciding to try and get a second mortgage and you may want to do some homework on the topic. A second mortgage will mean another bill and can put you in a risky financial state later on. However, for some a second mortgage is the only way to help them out of a rut. With mortgage lenders like Benson Mortgages, you will know that all your questions will be answered about the process and whether this will be the right step for you.
Things to Consider
A second mortgage is also called a home equity loan. This means that you are borrowing money against the value of your house. There is also another form called the home equity line of credit that works like a credit card when borrowing money. Obtaining a second mortgage involves all the same steps that were taken to obtain the initial mortgage, however they may be harder to obtain. This is because you will be creating another bill for yourself which means that you need to be able to pay more each month. How much you can get from a lender will be determined off of factors such as your credit score, the amount of equity you have in your home, and a loan-to-value ratio. Lenders will only allow you to borrow a certain percentage of the equity in the property.
What Lenders Want to Know
Before a mortgage lender will decide on whether to supply you with a second mortgage, they will consider many of the factors that are involved in obtaining the initial mortgage. Employment history and your credit score are pertinent and you should make sure that your credit score is higher than it was when you obtained your first mortgage loan. Also, the lender will want to see the equity you have which is determined by subtracting the value of the home from the amount owed on the first mortgage. A lender will want to see that you have money on standby so that if you should run into some type of financial snag, you will still be able to pay them. Lastly, they will want to know how much debt you have when compared to your income. If you have acquired too much debt they will likely deny you.
When deciding that a second mortgage is the next step for you financially, consider the risks involved as well as the need. A lender knows the risk involved and will want to be assured that they will be paid. This is because if for some reason you default on your loans and your home is foreclosed on, the money received from auctioning your property will be paid to the primary mortgage lender and the second mortgage lender could be out of a lot of money.