Reasons to Get a Second Mortgage

It seems that getting a second mortgage is very popular these days, but why are people getting a second mortgage, to begin with? Is it a safe or a wise decision to do it when you’re not yet paid with your first mortgage? We have answers (and more) below!

First, What is a Second Mortgage?

Investopedia defines a second mortgage as a subordinate mortgage that is approved while the homeowner has another mortgage in effect.

This type of mortgage is backed by your home; which is why it is required that you have some equity before you can apply for it. By applying for a second mortgage, you’ll be able to refinance up to 85% of your home’s value, freeing fund to use for other purposes.

It is the freeing of some funds that is the main reason why most people apply for a second mortgage. Once they are approved, they usually use it for the following:

For Investing

It is no secret that you need money to make more money. In the case of investments, the bigger capital you put in it, the larger the gains that you can get.

For Further Schooling or Self Investment

Getting ahead in life for most people means needing to have the credentials for some positions, hence the need for further schooling. In some instances it is needed for a career change or just to be a better version of one’s self. Unfortunately school is not cheap and requires a significant investment on your part. If you qualify for a loan and have the means to pay the future monthly payments, why not go for it?

For Investing in a Second Property

Buying a second property for a vacation home, a rental, or an investment property requires some capital as most banks ask for a minimum 20% downpayment. Tapping into the equity of a home you already own allows you to come up with the funds for this quickly. By doing this, you van effectively grow your assets as long as you won’t default on your monthly payments.

For Paying Debts with a High Interest Rate

Credit card companies can charge as high as 30% interest on your balance. This is a lot of money that simply goes to the banks, burying you deeper in debt. By taking a second mortgage to pay loans like this, you can pay your way out of debt faster.

For Funding a House Renovation

Spring is just a few months away or perhaps you will want to get renovations done before winter. You will need a substantial amount of money to make this possible. Taking a personal loan for this purpose is usually met with a rejection but with a second mortgage, you can get what needs to be done completed by the time you want it. This is especially handy for repairs and renovations that preserve the home such as a roof replacement.

How to Get a Second Mortgage?

Getting a second mortgage is not as challenging as most may think more so if you get the help of a licensed mortgage broker. Our mortgage professionals at Homebase Mortgages will help you throughout the process of mortgage application until you finally qualify for a loan. We will ensure that your mortgage will have the lowest possible interest rate and that the terms will be exactly what you can manage so you won’t fall behind on your monthly payments. Simply contact us at your earliest convenience.

Why Use Private Mortgage Loans

Private mortgage loans are helping people have access to funds they won’t otherwise have by using their property as a collateral. Of course, one can try to get a traditional loan from the bank or some other financial institution but that may not always be possible due to a variety of reasons. Here are some of them:

Qualifying Issues

Institutions often require that the borrower have a good credit score in addition to having a good property plus a lot of other requirements. In some cases, loans are not approved because the borrower’s property is not producing a good enough income to qualify as collateral or that it requires too many repairs or significant rehabilitation to be usable.

When institutions decline a borrower, it is often then that they seek other sources of funds and come across a private mortgage lender. Private mortgage lenders do not care about somebody’s credit score or some other requirements. They only often require that the amount to be borrowed is fair considering the property’s appraised value and the borrower’s projected income. Simply be able to pay the loan or have property that can offset the cost of the loan in the event of a default is all they require.

The Need for Privacy

Applying for a loan in an institution means filling up paperwork and a lengthy verification process leading to several people becoming aware of the loan application. If a person is going through a divorce or has a new lawyer that he or she may not be very comfortable with yet, this can be a very stressful time. Private mortgage lenders do not put borrowers in such a predicament and do not care if someone is delayed in his tax return or if his property information details are not up to date.

Speed Issues

Mortgage money from financial institutions or banks can take 60 to 90 days to get to the borrower. This is because traditional lenders often require an extensive assessment of the borrower’s current financial status, credit history, tax returns, and financial statements aside from getting the appraised value of the property.

On the other hand, private mortgage lenders usually just take 7 to 10 days to complete a transaction. This is because they usually only require assessment of the property as the main criteria before approving a loan therefore resulting in a significantly quicker approval process. They can decide in a matter of a day or two with no need for a loan approval committee like what is seen in traditional financial institutions.

Needing More Money

Private mortgage lenders may allow the borrower to borrow more because they only use the property’s appraised value with no need to subtract their own capital or adjust based on the borrowers’s income. This means that the borrower may be able to push for a bit more as long as the private mortgage lender is amenable. Win-win!

Ready to apply for a private mortgage? Let our professional mortgage brokers lend a helping hand. Contact us for private mortgage assistance.