How to Get Second Mortgage Loans
Second mortgages can provide you with cash when you need it as long as you have equity in your home and are willing to borrow against it. However, second mortgage rates are higher than first mortgage rates, but second mortgage loans tap into the equity of your home and turn it into usable cash. If you need a second mortage, the following steps will help guide you through the process.
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Instructions
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Find one or several mortgage lenders to speak to. You may be able to get second mortgage loan from the same lender that holds the note on your first mortgage as this is often easier than working with a new second mortgage lender because your current lender already has a valuation on the property you own and has worked with you before.
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Get your home appraised. Second mortgages are based on the value of your home. If you already owe more on your home than it is worth, mortgage lenders will usually be unwilling to give you a second mortgage. You are borrowing against the value of your home, so there must be some value there. Often, mortgage lenders will have their own appraisers or appraisal requirements, so make sure you speak with them first.
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Compare second mortgage rates. Second mortgage rates are usually higher than rates for a first mortgage because the debt is considered to be riskier. If you default on your first mortgage, the bank can foreclose on the house and will likely get paid what it is owed. If you default on a second mortgage, the second mortgage lenders can still foreclose, but the holder of the note on the first mortgage will get paid first.
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Apply for second mortgage loans. Once you have selected one or more second mortgage lenders that is offering you a good rate, you can apply for second mortgages loans. You want to apply for any loans you are going to apply for within a one- to two-day period. Multiple inquiries on your credit report can lower your score, but usually if there are several inquiries in a one- or two-day period, the credit reporting agencies lump those together to allow you to shop for the best first or second mortgage rates.
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Fill out the loan paperwork and pay closing costs. Once you have been approved for a second mortgage loan, you need to fill out the paperwork and pay the costs and fees associated with the loan.
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Receive your payment. Some second mortgages pay a lump sum when you sign the loan paperwork. This means you get a check for the amount you borrowed. Other second mortgage loans are structured in the form of home equity lines of credit, which means you get a line of credit you can access as needed, sometimes with a credit card or check card like an ATM
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Tips & Warnings
Remember, you are borrowing against your home with second mortgages. If you do not pay back the debt, second mortgage lenders can take your home. Be wise about borrowing
Second mortgages, like first mortgages, are usually paid back on a monthly basis.
If you miss multiple payments on second mortgage loans, your lender may be able to "call' the loan or ask for the full balance due. If you are unable to pay, second mortgage lenders may be able to foreclose on your home, just like first mortgage lenders can.
