Mortgages, private mortgages, second mortgages, home equity loans—how does someone know what type of loan is right for them? Differentiating can be difficult and mind-numbing.
Second mortgages might be a touch less popular than other methods but that doesn’t mean that it should be considered less. A review of second mortgages can convey that this is a proven method to obtain funds and, more importantly, if this is right for you.
Here are some of the more important factors that a borrower should know.
A Second Mortgage is a Proven Way to Access Funds Quickly
Think of a second mortgage as a way to tap into the available equity in the investment of your home. You can adhere to the terms of your first mortgage and most likely avoid any penalties associated with refinancing.
Remember, you need to have a good amount of equity in your home to leverage a second mortgage.
You can Pursue a Private Lender for a Second Mortgage
If you are having trouble being approved for a second mortgage by a traditional lender like a bank or even where you have your first mortgage, then you can consider private lending options.
Private lenders typically have less rigid qualification guidelines and are more open to different agreements that result in a borrower being approved.
The Different Types of Second Mortgages
Second mortgages can be accessed as a separate loan or it can be remitted in the form of a home equity loan or line of credit secured by your home.
How the funds are made available comes down to your preferences and circumstances.
Second Mortgages Work Best as Short-Term Solutions to Financial Problems
There are many situations where a second mortgage can be useful. Since it can come with higher interest rates, penalties and additional fees, it is best employed in the short term to get a borrower over a financial hurdle such as home renovations or to open a business.
Depending on the situation a borrower finds themselves in, second mortgages can be a useful lifeline. Make sure you understand the details and ramifications and that you go into the arrangement equipped with an exit strategy.