If you are on the path to owning your home and you find yourself in the position to need funds to assist with the process, you may be considering taking out a second mortgage. Before taking this step you should know all of the possible risks and how much it will cost to do so. Just like buying a home is a big step, taking out a second mortgage is an even bigger step. If you are unable to pay either of your mortgages, you could lose your home all together. Doing your homework on the process to getting a second mortgage and the risks involved is important and OE Mortgage can be a great asset to understanding the process.
What is a Second Mortgage?
A second mortgage is much like your initial mortgage; however the lender will provide funds more reluctantly. A second mortgage can be provided in a lump sum based on what the house is worth, but is more commonly provided with an equity line of credit. The type of mortgage you will obtain will depend on many factors and there will need to be a more secure confidence that the lender will receive their money. A second mortgage is generally only available for an amount no greater than about 80% of what the home is worth. The need for a second mortgage can be for various reasons and the ability to pay for one must be apparent before a lender will even consider the deal.
The Risks Involved for Borrowers
Those that feel that they need to take out a second mortgage will want to first consider all avenues before making their final decision. Because the move is so risky for both the lender and the borrower, the interest rate involved with second mortgages will be much higher. The good part about this is that it will be secured, unlike taking on another credit card which could be one of the reason you need a second mortgage in the first place. You will need to know that if you default on payment to a second mortgages, there will be penalties involved which will cost you even more money. You must also consider what is called closing costs. All loans require closing costs and you will want to know what they are before you move too far in the process of obtaining a second mortgage.
After you have weighed out all of your options and are ready to decide if a second mortgage is the right step to take, getting advice and assistance from a broker can help the process. They will help you understand what each lender expects and they help you to get in the position to be a good candidate for obtaining a second mortgage. Because the decision to get a second mortgage should not be taken lightly, a broker will be completely open and honest about whether this is the right decision. You should have a sound plan for your finances before you take a large step into borrowing for a second mortgage and a broker can help you do this.