When to Get a Second Mortgage
If you find yourself struggling to make ends meet, in need of
some additional money for home repairs or home improvements, or
just find that you have some financial need that you can't
fulfill with your standard wages, you might want to consider
taking out a second mortgage on your home.
Of course, when many people think of a second mortgage they
think of the scenario that's usually presented in movies and on
television of individuals drowning in debt who have had to take
out several mortgages simply to stay afloat.
While this may be the case with some individuals, most people
who take out a second mortgage do so simply as a means to cover
expenses or to begin new projects using a form of collateral
that is both high in value and easy to find a lender for.
Below is some additional information that will tell you exactly
how a second mortgage works and how to get the best deal on your
new mortgage that you can.
Defining the Second Mortgage
Before you can get a second mortgage, it helps to know exactly
what one is. Basically, a second mortgage is a secondary loan
that is taken out on an already mortgaged property. This loan is
considered to be subordinate to the original mortgage, which
means that the lender who issued the loan will only receive
their money after the original mortgage has been repaid in the
case of a default and the subsequent sale of the property.
Second mortgages are generally considered to be a higher risk
than the original mortgage, since the lender which issued the
original mortgage has first rights to the property... because of
this, interest rates for a second mortgage are usually higher
than those for the primary mortgage.
Common Uses for a Second Mortgage In addition to the examples
provided above, there are many common uses for the funds
received from a second mortgage. These loans are often used to
consolidate multiple debts into a single monthly payment, or
they may be used to finance a vacation or moving expenses.
Second mortgages are also a common method of securing startup
capital for new businesses in lieu of a small business loan, and
have also been used as alternative means for financing new
vehicles, paying for medical expenses, and other large expenses
that might be difficult to pay for out of pocket.
Shopping for the Best Mortgage Rates
In order to make sure that you get the best rate for your second
mortgage, it's important to shop around at different lenders to
see who has the better deal. Many second mortgages come from
finance companies and mortgage lenders, though you should make
sure that you keep your options open... after all, if you decide
to ignore certain types of lenders you might miss out on the
best rates.
Request loan quotes in much the same manner as you would if you
were shopping for a primary mortgage or other loan, getting
quotes from a variety of lenders and online lending companies.
Take your time and carefully compare both the interest rates
that each lender offers and the repayment terms that you're
expected to abide by.
Once you've found the second mortgage quote that has the best
rates for the terms that they offer, investigate the offer
further... there's a good chance that it will be the loan for
you. Verify the terms and rates that are offered, and submit
your application; you're well on your way to getting the money
that you need from your new second mortgage.
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