What Is A Second Mortgage & How Does It Work?
When You Might Want To Consider Applying For A Second Mortgage
Did you know that many homeowners qualify for a second mortgage on their home? The primary mortgage is taken out when the property is initially purchased. A second mortgage enables homeowners to borrow against the value of their property even if the first mortgage is not fully paid back.
A second mortgage can be extremely beneficial if you need fast cash for an emergency or unexpected situation, to pay off other debts, or another circumstance. Learn more from Arizona’s leading Chandler mortgage broker how second mortgages work and when you might want to consider applying for one.
What Is a Second Mortgage?
A second mortgage is a type of mortgage that homeowners obtain while they are still paying off their first mortgage. In many ways, second mortgages are similar to primary mortgages, while also operating under some of their own guidelines and regulations.
Second mortgages enable homeowners to borrow against the equity of their home. They will make monthly payments to repay Apache Junction mortgage loan separately from their primary mortgage payments. A second mortgage will have slightly different terms, repayment periods, and interest rates than a primary mortgage.
What Happens If The Homeowner Defaults On The Second Mortgage?
If the homeowner defaults on the second mortgage, the proceeds from the sale of the home after the foreclosure would go toward paying off the primary mortgage. Any money that was left over from the home sale would then be used to settle the second mortgage.
Because there is a higher element of risk for the lender and a second mortgage can only be repaid after the first mortgage has been paid in the event of a loan default, second mortgages always hold higher interest rates.
However, the amount that is borrowed through a second mortgage will always be less than what is borrowed with a primary mortgage. The amount of money that is available to you through a second mortgage will depend on how much equity your home holds, your income, and other requirements.
What Are The Benefits Of a Second Mortgage?
There are plenty of reasons why you might consider getting a second mortgage with your Gilbert mortgage banker. Consider these reasons for getting a second mortgage instead of refinancing your current mortgage:
Obtain a Higher Loan Amount
Refinancing an existing mortgage might enable you to take out some cash, but you’ll be able to take out more with a second mortgage. You may qualify to borrow as much as 80% of your home’s value, especially if you’ve been paying on your primary mortgage for a long time and have a high amount of equity.
Enjoy a Reduced Interest Rate
Although second mortgages generally have higher interest rates than primary mortgages, they tend to have lower interest rates than other types of loans. This is because second mortgages are secured debt. Your home is the collateral behind the loan, which means less risk for the lender. All of this means that lenders will usually offer lower rates for second mortgages than they will for credit cards and some other types of loans.
What Are the Different Types Of Second Mortgages?
Home Equity Loan
With this type of second mortgage, homeowners are able to take a lump sum out of their home’s equity in cash. Typically, there are origination, closing, and other fees involved with this one-time transaction. The lender will then be able to place a second lien on the home. Just like a primary mortgage, homeowners will make monthly payments with interest on their home equity loan.
Home Equity Line Of Credit (HELOC)
Unlike a home equity loan, where homeowners can take out a single lump sum of cash, home equity lines of credit work like a credit card. After the application process, homeowners may be approved to take out a line of credit based on the equity in the property. Within the terms of the HELOC, they can take out as much money as they need when they need it. There will be a maximum borrowing amount for this type of Chandler home mortgage loan and the monthly repayments will fluctuate depending on how much money is being borrowed at the time.
Is a Second Mortgage Right For Me?
Homeowners who are qualified for a second mortgage may appreciate having a convenient way to pay for home renovations, tuition, emergencies, bills, other loan payments, and much more. Because you’re working with the same lender, a second mortgage can be much easier to deal with and prevent you from needing to make payments to multiple lenders each month. The amount of money that you’re qualified to borrow will depend on how much equity you have, your credit rating, and a variety of other factors. Ask your Apache Junction mortgage broker if you might qualify for a second mortgage!
Get In Touch With Arizona’s Trusted Mortgage Lenders
If you’re interested in a second mortgage on your home, contact the KHoward Mortgage Team in Mesa. We offer the most competitive interest rates in the market and are committed to providing the fastest turnaround times in the mortgage industry. Plus, you’ll enjoy our outstanding customer service with frequent communication! Let us guide you through your home financing journey! Contact us today to get started.
KHOWARD MORTGAGE TEAM
2913 N Power Rd #108
Mesa, AZ 85215