Should I Take Out a Second Mortgage?

Is it time to take out a second mortgage? There are several ways to tell. The main reason for taking out a second mortgage is to take equity from your home and turn it into cash in pocket. A second mortgage is a loan taken against the equity that has been built in your home by paying off some of the principal balance on your first mortgage loan. Most lending institutions require the total amount of debt from the first and second mortgage combined could not be more than 80% of the total market value of the home. Ideally, record low interest rates and a competitive lending marketplace can create a lending environment where some lenders will approve a second mortgages that, when combined with first mortgage balance, is totaling as high as 130% of the home value.

Second mortgage repayment terms can vary considerably, so it is important that you look around and choose the options that are best for you.
Second Mortgage options range in length from 2 – 20 years, with the majority of second mortgage loans being 5 – 10 years.
Options include fixed rate and variable or adjustable rates and 125’s and 115 loans.

Most loan consumers have many questions concerning their second mortgage. Some of the most common are listed below. If you don’t see the answer you need contact a lending professional and use out mortgage calculator to make things more clear.

How much will my monthly payments be and will they pay off the loan and when?

You must make sure you understand how much your monthly payments will be and what you are actually paying with them. Your lender will give you this information in advance. If not, ask. With some loans, you will be required to make monthly payments on the principal and interest. With others, you may be required to pay interest on the borrowed amount only. With loans like that, your monthly payments will not reduce the principal amount of the loan. You will be required to pay back the entire borrowed amount at the end of the loan period.

The National Association of Realtors recently released an interesting report about second mortgages in the United States. NAR’s study was based on an analysis of information collected under the Home Mortgage Disclosure Act (HMDA). Mortgages rates in general have steadily declined and may continue to do so in the coming year.