A second mortgage means exactly what it says it is – a loan made “in addition” to a first mortgage, and it is based on the amount of equity one has built into their home. There are many consumers who use them to pay for home improvements/renovations, pay off debts, etc. The consumer has already been through the process for their first mortgage; therefore, the underwriting requirements for a second mortgage is usually much easier as well as the cost of the transactions involved are usually significantly lower. These things can make up for the fact that interest rates on the second mortgage are a tad higher than the first mortgage.
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For a second mortgage, the consumer borrows a fixed sum of money against their home equity and then pay it back over a specified period. The amount borrowed will be combined with the amount still owed on the first mortgage. Second mortgage loans are different from first mortgages in that they often have a higher interest rate and are usually for a shorter term or period of time. Second mortgages are traditionally offered with a fixed amount as well as a predetermined repayment plan. It is of utmost importance that consumers understand how much their monthly payments will be and what they include. It is advisable to shop around, make comparisons, etc. when looking for an appropriate lender.
General Overview for Second Mortgages
A consumer’s home is likely their biggest asset. By having a home to assist and back a consumer up when they need a loan is one of the most advantageous strategies of homeownership. Recently, there has been a substantial increase in the amount of consumers looking to use their homes as a means to get access to extra cash when they need it most, and, one of the best ways to accomplish this is through a second mortgage.
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About Second Mortgages
Consumers should take the time to investigate other options of borrowing against the equity of their home inclusive of loan products such as a home equity loan and a home equity line of credit. All these options provide an avenue for consumers to borrow against their equity but keep in mind that there are minor variations among these options that indicate one of the three options available may be the best option for the consumer. For the most part, it depends on the consumer’s individual financial status, the amount of money the consumer needs to borrow, as well as the amount of home equity the consumer has accumulated.
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