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What Homeowners Need to Know About Second Mortgages
A second mortgage — also referred to as a home equity loan or home equity line of credit — is just what it sounds like: another (second) mortgage on your home. Like with your original mortgage, your second mortgage is secured by your home, meaning that if you don’t pay the loan, the bank can take your home. However, if you default on your home loan payments, the original mortgage will be paid off by the sale of the property first, before any money goes to the second mortgage.
Second mortgages are especially appealing now because interest rates are low and home values are rising. Here’s what you need to know about second mortgages:
Types of Second Mortgages
There are two main types of second mortgages: home equity loans and home equity lines of credit. With a home equity loan, the lender gives you a lump sum of money all at once, and you repay it at regular intervals over a set period of time. Typically, the interest rates are fixed. A home equity line of credit, on the other hand, works like a credit card, so you spend the money as you need it. Typically, interest rates are adjustable.
Uses of Second Mortgages
There are few restrictions on how you can use the funds from a second mortgage. Many people use a second mortgage to fund big expenditures such as home improvements or repairs, to buy a second home or to pay off a big debt.
How Much Money Borrowers Can Get
The amount of money you can get depends on a number of things, such as the amount of equity you have in your home, your credit score and the loan-to-value ratio (this is the percentage of the property that is mortgaged).
Get started now to start the pre-approval process or give me a call at (408) 402-5936 with any questions that you may have.
North Star Mortgage & Realty can walk you through the process of getting a Fixed Second or Home Equity Line of Credit. Give us a call at 408-402-5936.