Property Already Secured But Still Need Loan: Go For 2nd Mortgage Loans.
Usually, to borrow loans the borrower
offers the asset (in most cases his home) as collateral.
At time, after borrowing a loan by offering his house
as collateral, borrower again needs money to pay off
the costly loan or for some other inescapable task.
In such case when borrower's house is already secured
once, the borrower again offers his house as security
to obtain a new loan, which is called second mortgage
loan. A second mortgage loan is placed on second position
in title. 2nd mortgages are subordinate loans of the
existing 1st mortgage.
A second mortgage is a loan secured
against your property which is already secured once.That
is, a second mortgage is done in addition to the existing
1st mortgage. This loan is secured by real property
with a mortgage note used as an instrument for repayment.
The 2nd loan is also known as a subordinate lien and
home equity loan. The second mortgage is held and recorded
in 2nd position on the title of the property.
Difference
between 1st mortgage and 2nd mortgage
If a borrower defaults on a 2nd loan the first mortgage
lender is paid before paying the second mortgage lender
when the asset is dispersed from foreclosure. Considering
the risk factor added to these subordinate home liens,
most lenders will charge a higher percentage of fees
in addition to requiring the consumer to borrower at
a higher interest rate than was offered with their 1st
mortgage.
2nd Mortgage Loan: Purpose
Money borrowed from a second mortgage loan can be used
for just about anything. However, most of the borrowers
use the money received through 2nd mortgage loan to
consolidate debt, do home improvements or pay tuition
fee of their children. Whatever you decide to do with
your loan proceeds it is important to remember that
if you default on your payment you can lose your home
so you will want to make sure that you are taking the
loan out for a worthwhile purpose.
2nd Mortgage Loan: Loan amount & Cost
2nd mortgage are considered more risky than 1st mortgage
and therefore most lenders offer 2nd mortgage at higher
rate of interest. 2nd mortgages can have loans with
both fixed and adjustable rates. 15 year amortization
schedule is the most Common 2nd terms for repayment.
Lenders offer amount upto 125% of the value of home
equity. However, the loan amount also depends upon borrowers’
profile. Similarly, since a 2nd mortgage loan is considered
risky, lenders charge higher interest rate to compensate
for the increased risk.
Another advantage of a second mortgage loan is that the interest you pay back on the loan may be tax deductible. Consult your tax advisor regarding your personal situation but in most cases the interest is 100% fully deductible as long as the combined loan to value of your 1st and 2nd mortgage do not exceed the value of your home.
Features of Second Mortgage Loan
- No initial credit check
- in principle approval within 24 hours
- Customized pricing
- Rate Lock, if you choose
- can consolidate all debts into this new loan within 3 business days
- Amount and rate of interest depend upon borrowers’ profile
2nd Mortgage Loan: Eligibility
Accepting or rejecting applications of accepting application
for 2nd mortage loan on a higher interest rate depend
upon the profile of the borrower. The various factors
which are considered while reviewing loan applications
are:
- Verification of income
- Full time employment
- Previous record of payments
- Any recommendation
As mentioned above, if you have secured your property to obtain a secured loan and after sometime you again need money for any purpose, your same property can be useful for you. In such case you can again mortgage your property, in addition to the first mortgage, to obtain another secured loan.
