How to Obtain a Second Mortgage
A second mortgage is more commonly referred to as a home-equity loan. A home-equity loan or second mortgage allows the homeowner to take out a loan using the value of the home that is not currently under a first mortgage. This value is calculated by subtracting the balance of the first mortgage from the total market value of the home. Second mortgages are often used to make home repairs or renovations, take vacations or to pay off higher interest-rate debt.
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Instructions
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Get an appraisal. Before you can apply for a second mortgage, you have to determine how much equity is in your home. To do this, contact a local real estate appraiser and obtain a full appraisal for your home. Though this will cost you a few hundred dollars, you can use this appraisal during the application process for your second mortgage.
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Determine the amount of equity you have. Simply subtract the pay-off amount of your mortgage from the value of your home. If this number is negative, it means that you owe more on your home than its worth. You will not qualify for a second mortgage if you have negative equity in your home.
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Select a lender. In most cases, borrowers seeking a second mortgage will choose to apply for the loan through their existing primary mortgage lenders. The benefit of this is that the borrower can streamline the application process as the primary lender already has much of the information required for the application. However, the borrower does not have to use her existing lender and is free to shop around and find the best deal.
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Complete the application process. Applying for a second mortgage is similar to applying for a primary mortgage. The lender will gather certain information about the borrower, will pull a credit report and require that documents be submitted to support the borrower's current financial condition such as tax returns, W2s and bank statements. Be prepared for the application process to take anywhere from one to three weeks or longer to complete.
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Deposit the loan check. After the application process is complete and the borrower is approved, he will receive a check for the proceeds of the loan that will be deposited into the borrower's checking account, just like any other check. The funds will be made available for use based on the borrower's bank policy and can be used for whatever purpose the borrower chooses.
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Tips & Warnings
Just like with a primary mortgage, a second mortgage places against your home a lien that allows the lender to take possession and sell the home if you fail to make your payments in accordance with your loan terms.
