Second mortgages are among the top kinds of loans that are offered by real estate lending companies. Because of its proliferation, many people are becoming more and more interested of such type of loan. For those who are planning to get a second mortgage, here are some things you have to know about first.
What is a second mortgage ?
A second mortgage is like a home equity loan. It does not refer to your mortgage loan or refinancing loan. When you apply for a second mortgage, you will be using the equity of your home as collateral while the original mortgage that you made is still being paid.
As such, a second mortgage allows you to make use of the value of your home even if you still haven't fully paid for the expense of financing your house. Instead of getting other types of loans for you to spend for home refurnishing and repairs, you can make use of second mortgages.
How do you pay off a second mortgage ?
You have to remember that when you get a second mortgage, the new amount that you will borrow will not add up to the original amount of the first mortgage. Instead, the amount of your first mortgage will not increase no matter how much you will get for the second mortgage. This is because your second mortgage is treated as a different loan from your first one. It will be treated as a separate accountability with its own billing cycle.
As a result, a second mortgage means that you will have to pay for another mortgage bill, aside from your original debt. So, you will have to deal with two mortgage bills monthly- one for the original mortgage loan, and another for your home equity loan.
What should you be wary about when choosing a second mortgage package ?
When choosing which among the many second mortgage loan packages you should avail of, the primary consideration is the interest rate.
You have to keep in mind that the interest rates for second mortgages are usually higher than that of an original mortgage loan. This is due to the fact that lenders consider the second mortgage to be riskier that the first one.
However, you have to remember that the interest rates of second mortgages are considered far more reasonable and affordable than the interest rates of other loans. Furthermore, the offered interest rates are often negotiable or adjustable, depending on your credit score which indicates your capability to settle your debts.
Where can you use your second mortgage ?
The prime reason why many people want to avail of second mortgages is the fact that it is a flexible loan. Once your home is approved as collateral, you can get the loan and use it for a variety of purposes.
Aside from using the second mortgage loan for the expenses of repairing or refurnishing your house, you can also get a second mortgage to pay for your child's education or to buy a new car or home equipment.
Visit Loan Answers to find more useful Articles, Guides & Loan Tips. You can find Mortgage Loans Articles, or search our main site for Questions & Answers about Second Mortgage.
Article Source: http://EzineArticles.com/?expert=Robert_Diarioti
Saturday, May 29, 2010
Tuesday, May 18, 2010
Debt Consolidation: Second Mortgage Loan Advantages and Disadvantages
You may never be as popular as today's second mortgage, but it could be your best friend. In today's finance-friendly world, it seems like everyone is getting a second mortgage or home equity line of credit -- and as interest rates climb, their popularity grows. Even so, you still need to ask yourself: what are the advantages and disadvantages? Time to do some homework - the kind of homework that could save you thousands of dollars.
"It's not about loans; it's about changing people's lives for the better," says Rory Cambra, president of the North San Diego County Chapter of the California Association of Mortgage Bankers and a mortgage banker with Pacific Capital Mortgage.
What is a second mortgage? Quite simply, it's another mortgage on your home, and like the first, it's secured against your property or the equity you've built up over the years. They can be fixed-rate or adjustable-rate.
So, what's the difference between a second mortgage and a home equity line of credit?
"A second mortgage is a lump sum. A home equity line of credit is basically an open checkbook," Cambra says. Lump sum loans are best when you need all the money at once.. A line of credit is best when your cash needs are stretched out over time, like a series of home improvements or college tuition payments.
Equity is the difference between your home's value and the balance on your mortgage loan. If your home is worth $500,000 and you owe $400,000 on the mortgage, then you have $100,000 of equity.
"Americans have hundreds of billions of dollars in equity, but most don't understand that the equity in their home is not safe, liquid or growing," Cambra says. "Everything from market conditions to disasters can significantly affect your home equity. It could literally just go away." Before you decide to jump in to the second mortgage waters, assess your family's financial needs and goals; explore the variety of second mortgage products, and understand how each type best serves your financial picture. Then consider the following:
Second Mortgage Advantages (They increase the more homework you do)
Make your equity work for you. It's a good thing to separate your equity from your mortgage and put it in a safe, liquid and growing environment. "You're not doing it to conserve your equity; you're doing it to create wealth. It can even be used to create your retirement nest egg," Cambra says.
A cash cushion. Cambra tells his customers that the best first use for your second mortgage is creating a cash cushion, suggesting a minimum of $5,000 be put away for emergencies. Why? So you won't turn to credit cards the next time an unforeseen financial need pops up.
Pay off debt.
A non-brainer: pay off all your high-interest debts, including credit cards.
Serious liquidity. You can create serious liquidity, like socking away one year's salary in the bank. (We can dream, can't we?) Pay for your child's education. That sigh of relief you just uttered is reason enough.
Create wealth.
Consider this: If you use the proceeds from your second mortgage properly, you can - on paper -- pay off your house in full. The key words being, "on paper." Obviously, you don't want to miss all the financial and tax benefits that go with your mortgage, but according to Cambra, creating wealth on a balance sheet that is equal to the amount you owe is an accountant's dream.
2nd Mortgage Disadvantages (They decrease as you do more homework)
Dealing with fear and stress. Everyone has trepidations when it comes to property finances. Fear causes some homeowners back away from a second mortgage. But if you educate yourself, and are prudent with the proceeds, you really haven't increased your risk.
Not protecting your home.
Be realistic about estimating your future income. If for some reason you cannot pay back the second loan, it could be disastrous. Consuming the proceeds of a second mortgage unwisely. Some homeowners use a second mortgage to take a lavish trip, buy that fantastic new car they've always wanted or spend it on frivolities. Then they end up going right back to their credit cards. "It's a fact: we are human, and we are driven by the pleasures of the world - and those are usually depreciating assets," Cambra says.
Second Mortgage Costs, Fees & Charges.
2nd mortgages have more defaults, so it's common for lenders to charge more fees up front. Prepare for and budget the costs. You might also have appraisal fees, points, applications costs and other closing costs. Ask your lender - beforehand - for a printed list of fees.
David is a free-lance writer and media consultant based in Southern California. He also serves as spokesperson for high-profile businesses, political campaigns and community issues.
Please visit these helpful resource websites: To get a no cost rate quote for a 2nd mortgage please check out Second Mortgage Quotes. If you need more loan advice about refinancing with Bad Credit, take a look at Equity Loan Refinancing. For the latest debt consolidation solutions, please visit the Debt Consolidation Loan Center.
Article Source: http://EzineArticles.com/?expert=David_W._Johnson
"It's not about loans; it's about changing people's lives for the better," says Rory Cambra, president of the North San Diego County Chapter of the California Association of Mortgage Bankers and a mortgage banker with Pacific Capital Mortgage.
What is a second mortgage? Quite simply, it's another mortgage on your home, and like the first, it's secured against your property or the equity you've built up over the years. They can be fixed-rate or adjustable-rate.
So, what's the difference between a second mortgage and a home equity line of credit?
"A second mortgage is a lump sum. A home equity line of credit is basically an open checkbook," Cambra says. Lump sum loans are best when you need all the money at once.. A line of credit is best when your cash needs are stretched out over time, like a series of home improvements or college tuition payments.
Equity is the difference between your home's value and the balance on your mortgage loan. If your home is worth $500,000 and you owe $400,000 on the mortgage, then you have $100,000 of equity.
"Americans have hundreds of billions of dollars in equity, but most don't understand that the equity in their home is not safe, liquid or growing," Cambra says. "Everything from market conditions to disasters can significantly affect your home equity. It could literally just go away." Before you decide to jump in to the second mortgage waters, assess your family's financial needs and goals; explore the variety of second mortgage products, and understand how each type best serves your financial picture. Then consider the following:
Second Mortgage Advantages (They increase the more homework you do)
Make your equity work for you. It's a good thing to separate your equity from your mortgage and put it in a safe, liquid and growing environment. "You're not doing it to conserve your equity; you're doing it to create wealth. It can even be used to create your retirement nest egg," Cambra says.
A cash cushion. Cambra tells his customers that the best first use for your second mortgage is creating a cash cushion, suggesting a minimum of $5,000 be put away for emergencies. Why? So you won't turn to credit cards the next time an unforeseen financial need pops up.
Pay off debt.
A non-brainer: pay off all your high-interest debts, including credit cards.
Serious liquidity. You can create serious liquidity, like socking away one year's salary in the bank. (We can dream, can't we?) Pay for your child's education. That sigh of relief you just uttered is reason enough.
Create wealth.
Consider this: If you use the proceeds from your second mortgage properly, you can - on paper -- pay off your house in full. The key words being, "on paper." Obviously, you don't want to miss all the financial and tax benefits that go with your mortgage, but according to Cambra, creating wealth on a balance sheet that is equal to the amount you owe is an accountant's dream.
2nd Mortgage Disadvantages (They decrease as you do more homework)
Dealing with fear and stress. Everyone has trepidations when it comes to property finances. Fear causes some homeowners back away from a second mortgage. But if you educate yourself, and are prudent with the proceeds, you really haven't increased your risk.
Not protecting your home.
Be realistic about estimating your future income. If for some reason you cannot pay back the second loan, it could be disastrous. Consuming the proceeds of a second mortgage unwisely. Some homeowners use a second mortgage to take a lavish trip, buy that fantastic new car they've always wanted or spend it on frivolities. Then they end up going right back to their credit cards. "It's a fact: we are human, and we are driven by the pleasures of the world - and those are usually depreciating assets," Cambra says.
Second Mortgage Costs, Fees & Charges.
2nd mortgages have more defaults, so it's common for lenders to charge more fees up front. Prepare for and budget the costs. You might also have appraisal fees, points, applications costs and other closing costs. Ask your lender - beforehand - for a printed list of fees.
David is a free-lance writer and media consultant based in Southern California. He also serves as spokesperson for high-profile businesses, political campaigns and community issues.
Please visit these helpful resource websites: To get a no cost rate quote for a 2nd mortgage please check out Second Mortgage Quotes. If you need more loan advice about refinancing with Bad Credit, take a look at Equity Loan Refinancing. For the latest debt consolidation solutions, please visit the Debt Consolidation Loan Center.
Article Source: http://EzineArticles.com/?expert=David_W._Johnson
Is A Second Mortgage Going To Help You?
Nowadays, almost everyone buys his or her home using a mortgage. Sometimes, though, life can be unexpected, and sometimes it can be just plain expensive! At times like these, it's frustrating to know that your house is worth so much more than you paid for it, and yet you can't just take that equity down to the local store to buy groceries - or can you?
Well, you probably wouldn't want to touch the equity of your home just for the groceries, but if you need to improve the house, start a business, pay off some expensive debts, or maybe put your kids through college, then a lump sum would be very handy. That's where a second mortgage may prove to be a good option.
Basically, when you buy a home and take out a mortgage, that's known as a first mortgage. That means that if you get into financial trouble, and the lender forecloses, they have "first" grab at the sale funds. If you then take out a second mortgage against the house, usually against the equity you've built up over time, then that lender will get "second" grab at the sale funds.
Because the lender who gives you the second mortgage is second in line, the risk to them is much higher. If the property is sold under foreclosure, and doesn't fetch the expected price, then it's the second mortgage lender who's going to miss out - well, at least until they start chasing you personally, anyway. But all that means they're opening themselves up to a bigger risk of losing money, or having a lot of hassle getting their money back.
So second mortgages are almost inevitably more expensive that first mortgages - both in terms of interest rates, and the fees charged. Quite often, too, a second mortgage has to be paid off in a shorter time frame. Your first mortgage might be for 30 years, but the second mortgage might only be for 10 years, as an example.
Apart from that, second mortgages come in almost as many different variations and have as many options as first mortgages. You can get fixed rates, adjustable rates, interest only, balloon payments - and the list goes on. So before you start trying to source a second mortgage, it's a good idea to have a very clear idea of what exactly you're looking for, and what you can afford to pay. If you're not in a position to make high payments every month, then you might be able to source a second mortgage with lower payments and a balloon payment after 5 years. Hopefully by then (particularly if you're doing home improvements) your house will be worth more, and you may be able to refinance both mortgages into just one, lower rate first mortgage.
There are a couple of different ways to set up a second mortgage, although technically they're not all called second mortgages! Basically, what we're talking about here is ways to access the equity you've gained in your home. So there's a standard second mortgage, which means you have two loans against your home. Remember, though, that even the combined loans probably won't be able to go above eighty percent of the value of the home.
You can also organise a home equity loan. This is mostly the same as a second mortgage, but is generally cheaper, both in interest rates and charges. Generally these are offered with adjustable rates, and quite often are taken out with the same lender as the first mortgage.
A variation of this is the home equity line of credit. This is where the loan funds are set up like a big bank account, and you can take out amounts periodically when you need them - for example, when the college fees are due.
All types of second mortgage will generally require an application, a credit check and a home appraisal. The criteria are often stricter than for a standard home loan, simply because the risk to the lender is higher. Even so, it's unlikely you'll be able to borrow more than eighty percent of the appraised value of the home.
In the end, only you can decide whether a second mortgage is a good idea for you. It can be enticing to suddenly have a windfall of a large lump of money, particularly when things are tight, but in the end it's no different to any time of credit - at some point, you are going to have to pay it back. So think very hard about your financial situation and your ability to make repayments when considering a second mortgage.
There's lots of great home loan information at Home Loan Zone Central [http://www.homeloanzonecentral.com]
Article Source: http://EzineArticles.com/?expert=Felicity_Walker
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Well, you probably wouldn't want to touch the equity of your home just for the groceries, but if you need to improve the house, start a business, pay off some expensive debts, or maybe put your kids through college, then a lump sum would be very handy. That's where a second mortgage may prove to be a good option.
Basically, when you buy a home and take out a mortgage, that's known as a first mortgage. That means that if you get into financial trouble, and the lender forecloses, they have "first" grab at the sale funds. If you then take out a second mortgage against the house, usually against the equity you've built up over time, then that lender will get "second" grab at the sale funds.
Because the lender who gives you the second mortgage is second in line, the risk to them is much higher. If the property is sold under foreclosure, and doesn't fetch the expected price, then it's the second mortgage lender who's going to miss out - well, at least until they start chasing you personally, anyway. But all that means they're opening themselves up to a bigger risk of losing money, or having a lot of hassle getting their money back.
So second mortgages are almost inevitably more expensive that first mortgages - both in terms of interest rates, and the fees charged. Quite often, too, a second mortgage has to be paid off in a shorter time frame. Your first mortgage might be for 30 years, but the second mortgage might only be for 10 years, as an example.
Apart from that, second mortgages come in almost as many different variations and have as many options as first mortgages. You can get fixed rates, adjustable rates, interest only, balloon payments - and the list goes on. So before you start trying to source a second mortgage, it's a good idea to have a very clear idea of what exactly you're looking for, and what you can afford to pay. If you're not in a position to make high payments every month, then you might be able to source a second mortgage with lower payments and a balloon payment after 5 years. Hopefully by then (particularly if you're doing home improvements) your house will be worth more, and you may be able to refinance both mortgages into just one, lower rate first mortgage.
There are a couple of different ways to set up a second mortgage, although technically they're not all called second mortgages! Basically, what we're talking about here is ways to access the equity you've gained in your home. So there's a standard second mortgage, which means you have two loans against your home. Remember, though, that even the combined loans probably won't be able to go above eighty percent of the value of the home.
You can also organise a home equity loan. This is mostly the same as a second mortgage, but is generally cheaper, both in interest rates and charges. Generally these are offered with adjustable rates, and quite often are taken out with the same lender as the first mortgage.
A variation of this is the home equity line of credit. This is where the loan funds are set up like a big bank account, and you can take out amounts periodically when you need them - for example, when the college fees are due.
All types of second mortgage will generally require an application, a credit check and a home appraisal. The criteria are often stricter than for a standard home loan, simply because the risk to the lender is higher. Even so, it's unlikely you'll be able to borrow more than eighty percent of the appraised value of the home.
In the end, only you can decide whether a second mortgage is a good idea for you. It can be enticing to suddenly have a windfall of a large lump of money, particularly when things are tight, but in the end it's no different to any time of credit - at some point, you are going to have to pay it back. So think very hard about your financial situation and your ability to make repayments when considering a second mortgage.
There's lots of great home loan information at Home Loan Zone Central [http://www.homeloanzonecentral.com]
Article Source: http://EzineArticles.com/?expert=Felicity_Walker
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All About Second Mortgages
Second mortgages are an increasingly popular way for homeowners to raise finance by using the equity in their property. Second mortgages are also known as "home equity loans" and "secured loans."
Essentially, second mortgages are loans secured against properties on which there are already first mortgages from different lenders. As an alternative to second mortgages, applicants could receive a further advance on their first mortgages instead.
Second mortgages are used extensively throughout the UK by homeowners who wish to release equity from their homes in order to fund activities such as home improvements, debt consolidation, purchasing a new car, or funding a holiday.
Lenders are willing to approve second mortgages for almost any purpose so long as the combined loan-to-value ratio of the first and second mortgages does not exceed their allowable upper limit.
Basically, home owners who have equity in their properties can secure second mortgages against them in addition to the first mortgages. The funds from the second mortgages will be deposited into the borrowers' bank accounts which can then be used for any purpose.
It is important to note that second mortgages are usually secured against the borrowers' homes. Taking out second mortgages could therefore lead to home repossession if the borrowers do not keep up with their repayments.
Secured loans normally have a shorter term than first mortgages and also attract higher interest rates due to the perceived increased risk by lenders. Therefore the monthly repayments on second mortgages can seem excessive when compared to first mortgages.
If the repayments on second mortgages seem too high, borrowers should instead consider releasing equity be increasing the balance of their first mortgages. Because the interest rate will probably be lower, and the term of the first mortgage longer, the increase in the monthly repayment should be less than for the monthly repayments on second mortgages of the same amount.
If applicants would prefer to not put their homes at risk they may wish to consider applying for unsecured loans instead. Unsecured loans, or personal loans, are not secured against the equity in the borrowers' homes and therefore do not put their properties at risk.
It should be noted that unsecured loans usually come with higher interest rates than second mortgages.
If borrowers are in any doubt with whether or not to use second mortgages to raise funds, they should consult with an independent mortgage adviser.
Visit UK Mortgage Source for up-to-date information on Second Mortgages
Article Source: http://EzineArticles.com/?expert=Michael_Sterios
Essentially, second mortgages are loans secured against properties on which there are already first mortgages from different lenders. As an alternative to second mortgages, applicants could receive a further advance on their first mortgages instead.
Second mortgages are used extensively throughout the UK by homeowners who wish to release equity from their homes in order to fund activities such as home improvements, debt consolidation, purchasing a new car, or funding a holiday.
Lenders are willing to approve second mortgages for almost any purpose so long as the combined loan-to-value ratio of the first and second mortgages does not exceed their allowable upper limit.
Basically, home owners who have equity in their properties can secure second mortgages against them in addition to the first mortgages. The funds from the second mortgages will be deposited into the borrowers' bank accounts which can then be used for any purpose.
It is important to note that second mortgages are usually secured against the borrowers' homes. Taking out second mortgages could therefore lead to home repossession if the borrowers do not keep up with their repayments.
Secured loans normally have a shorter term than first mortgages and also attract higher interest rates due to the perceived increased risk by lenders. Therefore the monthly repayments on second mortgages can seem excessive when compared to first mortgages.
If the repayments on second mortgages seem too high, borrowers should instead consider releasing equity be increasing the balance of their first mortgages. Because the interest rate will probably be lower, and the term of the first mortgage longer, the increase in the monthly repayment should be less than for the monthly repayments on second mortgages of the same amount.
If applicants would prefer to not put their homes at risk they may wish to consider applying for unsecured loans instead. Unsecured loans, or personal loans, are not secured against the equity in the borrowers' homes and therefore do not put their properties at risk.
It should be noted that unsecured loans usually come with higher interest rates than second mortgages.
If borrowers are in any doubt with whether or not to use second mortgages to raise funds, they should consult with an independent mortgage adviser.
Visit UK Mortgage Source for up-to-date information on Second Mortgages
Article Source: http://EzineArticles.com/?expert=Michael_Sterios
Monday, May 17, 2010
What is an ARM? What You Need to Know About Adjustable-Rate Mortgages
What is an ARM? When is it smart to get an ARM? When should you avoid an ARM? When you are looking into refinancing or financing your home one of the options you will have is the ARM which stands for Adjustable Rate Mortgage.
Adjustable Rate Mortgages is a loan program that will provide you with a lower interest rate than you would get with a fixed-rate loan. However, this lower interest rate comes at the expense of time. You will only receive this rate for a short period of time. After your fixed rate period is up your monthly payment will actually adjust up and down as interest rates adjusts every year thereafter.
The ARM program was created specifically for times when rates are high. A buyer could opt for the ARM and hope for rates to come down by the time their fixed period is up. Rate terms can vary. Your ARM can be a 3/1 which means your rate is fixed for three years, a 5/1 which means your rate stays fixed for five years. A 7/1 and a 10/1 are other common term periods. After your loan reaches the cutoff year your rate will begin to adjust every year thereafter.
When should you consider an ARM?
1. An ARM can allow you to qualify for a larger loan due to the discounted rate and lower monthly payment. Your mortgage lender can use an ARM to help you plan and coincide with your changing financial needs.
2. If you plan to sell your house within three to four years from the time you obtain your loan an ARM can be useful to you. During the short time you own your home you will be able to take advantage of a discounted interest rate and lower monthly payments. Before your rate adjusts you will be selling your home.
When should you avoid an ARM?
1. When rates are at an all time low there is absolutely no reason to get an ARM. You want to keep the good rate your getting as long as possible. If rates are low there is only one place for them to go...up. You do not want to get to the end of your fixed-rate period and suddenly your payment adjusts through the roof.
2. ARM's are not ideal if you are buying a home you plan to stay in for a very long time. A fixed rate will allow for consistency in your payments long term. If many years go by and rates are lower you can always refinance your loan to take advantage of the lower rates. If rates are decent and you have an ARM on a home you plan to keep you are taking a risk of that loan adjusting beyond your means.
Adjustable Rate Mortgages and their terms can vary. Be sure your lender explains all terms of your contract and do not be afraid to ask questions. A good lender is there to be your guide. He or she should be willing to take your calls and answer your questions promptly and honestly.
Always consider all loan programs and options with a professional before making your choice.
Robert W. Horner is a Residential Mortgage Banker with years of experience. To visit his personal website go to http://www.robertwhorner.com. To view mortgage rates go to http://www.mortgageratescharlottenc.com.
Article Source: http://EzineArticles.com/?expert=Robert_Horner
Adjustable Rate Mortgages is a loan program that will provide you with a lower interest rate than you would get with a fixed-rate loan. However, this lower interest rate comes at the expense of time. You will only receive this rate for a short period of time. After your fixed rate period is up your monthly payment will actually adjust up and down as interest rates adjusts every year thereafter.
The ARM program was created specifically for times when rates are high. A buyer could opt for the ARM and hope for rates to come down by the time their fixed period is up. Rate terms can vary. Your ARM can be a 3/1 which means your rate is fixed for three years, a 5/1 which means your rate stays fixed for five years. A 7/1 and a 10/1 are other common term periods. After your loan reaches the cutoff year your rate will begin to adjust every year thereafter.
When should you consider an ARM?
1. An ARM can allow you to qualify for a larger loan due to the discounted rate and lower monthly payment. Your mortgage lender can use an ARM to help you plan and coincide with your changing financial needs.
2. If you plan to sell your house within three to four years from the time you obtain your loan an ARM can be useful to you. During the short time you own your home you will be able to take advantage of a discounted interest rate and lower monthly payments. Before your rate adjusts you will be selling your home.
When should you avoid an ARM?
1. When rates are at an all time low there is absolutely no reason to get an ARM. You want to keep the good rate your getting as long as possible. If rates are low there is only one place for them to go...up. You do not want to get to the end of your fixed-rate period and suddenly your payment adjusts through the roof.
2. ARM's are not ideal if you are buying a home you plan to stay in for a very long time. A fixed rate will allow for consistency in your payments long term. If many years go by and rates are lower you can always refinance your loan to take advantage of the lower rates. If rates are decent and you have an ARM on a home you plan to keep you are taking a risk of that loan adjusting beyond your means.
Adjustable Rate Mortgages and their terms can vary. Be sure your lender explains all terms of your contract and do not be afraid to ask questions. A good lender is there to be your guide. He or she should be willing to take your calls and answer your questions promptly and honestly.
Always consider all loan programs and options with a professional before making your choice.
Robert W. Horner is a Residential Mortgage Banker with years of experience. To visit his personal website go to http://www.robertwhorner.com. To view mortgage rates go to http://www.mortgageratescharlottenc.com.
Article Source: http://EzineArticles.com/?expert=Robert_Horner
Second Mortgage - Valuable Tips To Help You Make The Right Decision
When considering the facts within this article, it may be quite surprising to find some of the issues you thought were settled are actually still being openly discussed as to which type of loans are best.
A second mortgage is a mortgage whose terms are subordinate to the first mortgage. Loans with a second mortgage are usually done when the homeowner needs money in order to pay for an existing loan.
What Type Of Loan Is Best - A Second Mortgage, Home Equity Loan Or Refinance?
This is a question every homebuyer is faced with when shopping for mortgages. Take this scenario: A homeowner is facing a credit card debt of $50,000. Should he take a $190,000 second mortgage to refinance an existing mortgage with a balance of $140,000? Or should he borrow the money from a $50,000 home equity loan?
In most cases, borrowers who took a mortgage when rates were lower will find a second mortgage better than a home equity loan. But to be certain, some factors need to be considered.
You need to compare the interest rate and points of the first mortgage with that of a second mortgage. Second, find out if there are any PMIs (Private Mortgage Insurance) involved with the second mortgage. Find out what loan term is most favorable for you on your second mortgage. Your income tax bracket and amount of cash you need from your second mortgage are also necessary factors.
Consider the case above. If the first mortgage at $14,000 was acquired two years ago, the interest rate would be 7 percent for 30 years without PMI. Let's say your income bracket is 39.6% (the highest) and you are capable of earning 5% more on your investments. Your house is now worth $213,000.
Hopefully the information presented so far has been applicable. You might also want to consider the following examples before you select a loan.
A second mortgage for $190,000 with settlement costs will require PMI. If you decide to get a home equity loan instead, you will get 30 years loan term at 8.25% and one point. For $50,000, your second mortgage will include additional costs for 15 years at 11.5% and one point. The result will be that over the course of five years, your second mortgage will have saved you $11,361 more than what refinancing will.
Take A Second Mortgage Or Get A New One And Pay PMI?
Getting a second mortgage has more advantages when it comes to taxes than a separate loan. But usually, this depends on many other factors.
Getting a second mortgage is better than getting a separate loan when the rate difference between the second mortgage and the first mortgage is small. If the loan term is short, then getting a second mortgage probably makes more sense than getting a separate loan. Balance is paid off faster with shorter term loans. Since second mortgages have considerably higher rates, the shorter the loan term is, the better it is to get a second mortgage loan.
Other factors that affect the advantage of second mortgages over separate mortgages are tax brackets, closing costs, and expected appreciation rate.
For example, you have a tax bracket of 15% and a 30-year first mortgage for $160,000 and a second mortgage for $20,000 at 11.75%, zero points, and to be paid off in 15 years. A separate mortgage would be for $180,000 with down payment at 10%. Interest rate for this separate mortgage would be at 8.25%, zero points, and 0.52% PMI.
When you calculate this, you can see that over the five years, a second mortgage will have saved you 16.97% more than a separate mortgage would.
With the right facts and information you will know you have made the right financial decision. The time spent educating yourself can be well worth your time and effort. Be sure to read more articles before you make your final choice of loan that is best for you.
Dean Shainin is a consultant specializing in home loans, strategies for loan financing, home equity loans, and consolidation loan information. To see a list of recommended loan companies, tools, resources, free quotes and articles, visit this site: http://www.homemortgageloantips.com
Article Source: http://EzineArticles.com/?expert=Dean_Shainin
A second mortgage is a mortgage whose terms are subordinate to the first mortgage. Loans with a second mortgage are usually done when the homeowner needs money in order to pay for an existing loan.
What Type Of Loan Is Best - A Second Mortgage, Home Equity Loan Or Refinance?
This is a question every homebuyer is faced with when shopping for mortgages. Take this scenario: A homeowner is facing a credit card debt of $50,000. Should he take a $190,000 second mortgage to refinance an existing mortgage with a balance of $140,000? Or should he borrow the money from a $50,000 home equity loan?
In most cases, borrowers who took a mortgage when rates were lower will find a second mortgage better than a home equity loan. But to be certain, some factors need to be considered.
You need to compare the interest rate and points of the first mortgage with that of a second mortgage. Second, find out if there are any PMIs (Private Mortgage Insurance) involved with the second mortgage. Find out what loan term is most favorable for you on your second mortgage. Your income tax bracket and amount of cash you need from your second mortgage are also necessary factors.
Consider the case above. If the first mortgage at $14,000 was acquired two years ago, the interest rate would be 7 percent for 30 years without PMI. Let's say your income bracket is 39.6% (the highest) and you are capable of earning 5% more on your investments. Your house is now worth $213,000.
Hopefully the information presented so far has been applicable. You might also want to consider the following examples before you select a loan.
A second mortgage for $190,000 with settlement costs will require PMI. If you decide to get a home equity loan instead, you will get 30 years loan term at 8.25% and one point. For $50,000, your second mortgage will include additional costs for 15 years at 11.5% and one point. The result will be that over the course of five years, your second mortgage will have saved you $11,361 more than what refinancing will.
Take A Second Mortgage Or Get A New One And Pay PMI?
Getting a second mortgage has more advantages when it comes to taxes than a separate loan. But usually, this depends on many other factors.
Getting a second mortgage is better than getting a separate loan when the rate difference between the second mortgage and the first mortgage is small. If the loan term is short, then getting a second mortgage probably makes more sense than getting a separate loan. Balance is paid off faster with shorter term loans. Since second mortgages have considerably higher rates, the shorter the loan term is, the better it is to get a second mortgage loan.
Other factors that affect the advantage of second mortgages over separate mortgages are tax brackets, closing costs, and expected appreciation rate.
For example, you have a tax bracket of 15% and a 30-year first mortgage for $160,000 and a second mortgage for $20,000 at 11.75%, zero points, and to be paid off in 15 years. A separate mortgage would be for $180,000 with down payment at 10%. Interest rate for this separate mortgage would be at 8.25%, zero points, and 0.52% PMI.
When you calculate this, you can see that over the five years, a second mortgage will have saved you 16.97% more than a separate mortgage would.
With the right facts and information you will know you have made the right financial decision. The time spent educating yourself can be well worth your time and effort. Be sure to read more articles before you make your final choice of loan that is best for you.
Dean Shainin is a consultant specializing in home loans, strategies for loan financing, home equity loans, and consolidation loan information. To see a list of recommended loan companies, tools, resources, free quotes and articles, visit this site: http://www.homemortgageloantips.com
Article Source: http://EzineArticles.com/?expert=Dean_Shainin
Saturday, May 15, 2010
The Facts About Getting A Bad Credit Second Mortgage!
A bad credit second mortgage is a specialist area and it pays to know the facts before you begin looking for advice.
What is a Bad Credit Second Mortgage?
A bad credit second mortgage, also known as an adverse second mortgage, is a loan that is taken out on a property you already have a mortgage on. The reason for undertaking a second mortgage is usually to release some of the equity, in order to help pay other debts, or to raise finance for a particular project. An bad credit second mortgage is the name given to a second mortgage product that is specifically designed for people with an adverse credit history.
Is an adverse credit second mortgage my only choice?
Your choice of finance will depend on your current circumstances and what you need to achieve. If you have a property with an existing mortgage and you only need to raise a certain amount of capital, then you should consider a second mortgage. You can specify the amount you would like the mortgage to be for; it doesn't have to be for the full value of your property. If you have applied for other loans or mortgages and been rejected because of your credit history, then you should investigate an adverse credit second mortgage to see if it meets your needs.
How will I know if I have an adverse credit history?
The first sign of an adverse credit history is when your application for a loan, credit card, store card or mortgage is rejected. This is usually because the lender has checked your credit rating and decided you are a bad risk for their standard products. If this is the case, you should check your credit report to see if it is accurate and so that you know exactly what position you are in. If you run several credit and store cards and have defaulted on any loan or other payments, then your credit history and rating could be affected. If this is the case, you will need to use specialist products such as a bad credit second mortgage to help resolve your financial problems.
Will it increase my debt?
A bad credit second mortgage should help you to manage your debt, provided you use the loan money to reduce your existing debts and you meet the repayment requirements on your other debts, such as your existing mortgage and your new second mortgage. This loan requires a proportion of your home as security, so it is important that you make the payments.
How can I find out more about adverse credit second mortgages?
Taking out an adverse credit second mortgage is something you should do when you have serious debt problems. For this reason, it is important that you talk to an independent professional adviser, such as a mortgage broker. With expertise in the market, they will be able to assess your current circumstances and recommend a product that will help you to manage your current finances whilst keeping monthly payments to a minimum. They will impress upon you the need to be sensible about your debts and serious about clearing them, but will also be able to help you plan properly so that you can use the capital raised by the bad credit second mortgage to improve your chances of eliminating your adverse history.
Elizabeth Grant writes exclusively for The Mortgage Broker specialist websites. To read more of Elizabeth's articles on Adverse Credit Mortgages please visit the Adverse Mortgage Centre.
Article Source: http://EzineArticles.com/?expert=Elizabeth_Grant
What is a Bad Credit Second Mortgage?
A bad credit second mortgage, also known as an adverse second mortgage, is a loan that is taken out on a property you already have a mortgage on. The reason for undertaking a second mortgage is usually to release some of the equity, in order to help pay other debts, or to raise finance for a particular project. An bad credit second mortgage is the name given to a second mortgage product that is specifically designed for people with an adverse credit history.
Is an adverse credit second mortgage my only choice?
Your choice of finance will depend on your current circumstances and what you need to achieve. If you have a property with an existing mortgage and you only need to raise a certain amount of capital, then you should consider a second mortgage. You can specify the amount you would like the mortgage to be for; it doesn't have to be for the full value of your property. If you have applied for other loans or mortgages and been rejected because of your credit history, then you should investigate an adverse credit second mortgage to see if it meets your needs.
How will I know if I have an adverse credit history?
The first sign of an adverse credit history is when your application for a loan, credit card, store card or mortgage is rejected. This is usually because the lender has checked your credit rating and decided you are a bad risk for their standard products. If this is the case, you should check your credit report to see if it is accurate and so that you know exactly what position you are in. If you run several credit and store cards and have defaulted on any loan or other payments, then your credit history and rating could be affected. If this is the case, you will need to use specialist products such as a bad credit second mortgage to help resolve your financial problems.
Will it increase my debt?
A bad credit second mortgage should help you to manage your debt, provided you use the loan money to reduce your existing debts and you meet the repayment requirements on your other debts, such as your existing mortgage and your new second mortgage. This loan requires a proportion of your home as security, so it is important that you make the payments.
How can I find out more about adverse credit second mortgages?
Taking out an adverse credit second mortgage is something you should do when you have serious debt problems. For this reason, it is important that you talk to an independent professional adviser, such as a mortgage broker. With expertise in the market, they will be able to assess your current circumstances and recommend a product that will help you to manage your current finances whilst keeping monthly payments to a minimum. They will impress upon you the need to be sensible about your debts and serious about clearing them, but will also be able to help you plan properly so that you can use the capital raised by the bad credit second mortgage to improve your chances of eliminating your adverse history.
Elizabeth Grant writes exclusively for The Mortgage Broker specialist websites. To read more of Elizabeth's articles on Adverse Credit Mortgages please visit the Adverse Mortgage Centre.
Article Source: http://EzineArticles.com/?expert=Elizabeth_Grant
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