What is a second mortgage?

A second mortgage is basically taking out a second loan on top of the existing loan on your home. This loan is secured with the property for collateral. If for example the value of your home is $200 000, but you still owe $140 000 on the loan, then the $60 000 difference is known as your equity. When borrowing against the $60 000, you would then be taking out a second mortgage.

Why take out a second mortgage?

People take out a second mortgage for various reasons. They want to finance home improvements, purchase a second home, consolidate other debt for a lower interest rate, purchase a new car or pay for university tuition. Whatever the reason may be for taking out a second mortgage, first make sure there is a way of recouping the money. It is especially not wise to spend a vast amount of money on a car when it already starts losing value the moment you drive out of the dealership. It makes more sense investing in a business.

Refinance is an option

Before you decide to apply for a second mortgage, first consider refinancing. Firstly, taking out a second mortgage usually implies a higher interest rate. Rather keep your current rate or try and refinance for a lower one. Secondly, sales people get a lot of commission out of second mortgage transaction. Lastly, when choosing to refinance, you keep some equity in your home. And if there is really an emergency you, still have an exit door. But, if the prices of houses fall the value of your house is down, you could end up with negative equity and even more debt.

What to look out for

The interest rate of a second mortgage tends to be higher than the primary mortgage, due to the fact that if any problems occur, payment would first be made to the first mortgage.

Companies also charge a lending fee, also known as points. One point is equal to one percent. For example, if you are borrowing $500 000 with a lending fee of 10 points, you will pay $50 000 in points. The points differ from one company to another; therefore I recommend shopping around before making a final decision.

Be aware of balloon payments where payment starts low, but increases very quickly. Rather take the fixed rate option.

Lastly, dont forget the additional closing costs such as, appraisal fees, application costs etc. If you arent capable of paying these fees, you may not be able to take out that second mortgage on your property.

If you are considering applying for a second mortgage, please think it through very carefully and consider all your options before making a final decision on taking out a second mortgage application.

Peter Owen owns a number of properties and helps new home owners and investors reach their property goals. You are welcome to follow these links to apply for a second mortgage. Its free. Second Mortgage or Property Refinance

November 13, 2008
30-yr 6.14 15-yr 5.81 5-yr ARM 5.98 1-yr ARM 5.33

November 6, 2008
30-yr 6.20 15-yr 5.88 5-yr ARM 6.19 1-yr ARM 5.25

October 30, 2008
30-yr 6.46 15-yr 6.19 5-yr ARM 6.36 1-yr ARM 5.38

October 23, 2008
30-yr 6.04 15-yr 5.72 5-yr ARM 6.06 1-yr ARM 5.23

October 16, 2008
30-yr 6.46 15-yr 6.14 5-yr ARM 6.14 1-yr ARM 5.16

Looking at changes in mortgage rates is interesting but it’s always nice to see what they translate into as far as a mortgage payment. Using our free mortgage calculator we translated the rates for the last two weeks into what they would mean for a 200k mortgage.

November 13th
30-yr $1217.16
15-yr $1667.25
5-yr ARM $1196.53
1-yr ARM $1114.33

November 6th
30-yr $1224.92
15-yr $1674.77
5-yr ARM $1223.64
1-yr ARM $1104.40

October 30th
30-yr 1258.87
15-yr 1708.31
5-yr ARM 1245.77
1-yr ARM 1120.56

So in the last two weeks the monthly payment on a 200k loan would have dropped $41.10 from $1258.87 to $1217.16. So what would be my advice for people looking for mortgage rates right now? First off I would avoid the 5 year arm. The small difference between the 5 year arm and the 30 year mortgage makes the 5 year arm pretty unappealing. In addition, the unstable nature of the market makes locking in to a longer loan term more appealing. If one gets a 30 year loand and rates move down they can always refinance to take advantage of the lower rate.

We talked a lot about rates but the other major factor in today’s market is the difficulty of getting approved for financing. Banks have become more reluctant to give out loans and that means credit scores are very important. If you are thinking of getting a mortgage soon I would start looking at your credit sooner rather than later. Also no doc loans are pretty much dead. So if you are self employed and received a no doc loan in the past I would not expect to get one in the current environment. So that basically means its a good idea to start preparing for a loan earlier in the process (talking to a loan officer, getting paperwork ready). Talking to a loan officer at later in the process without prepared documentation is probably a recipe for disaster.

So what is going to happne with rates over the next few months. Mortgage rates have been swinging wildly up and down recently. I expect to see some more large swings moving forward. That said I expect rates to stay roughly between 5.8 and 6.6. I don’t expect them to fall below 5.8 as long as banks have an uneasy feeling about the market. I don’t expect them to go above 6.6 any time soon because the government has made it clear they are going to do whatever they can to keep rates low.

Ki helps buyers looking for real estate in Austin. His website provides a search of the Austin MLS along with a free mortgage calculator and a tool that graphs mortgage rates.

Acquiring a mortgage loan from an in state mortgage lending company has many advantages most importantly of them all is the simple fact a Colorado based lending institution will know Colorado far better than the rest.

Colorado features a unique mixture of luxury homes, second homes, private homes and many others beside. Due to this, the borrowing needs of prospective Colorado home buyers are equally unique. This little known fact necessitates the need for a Colorado lender to work closely with borrowers to ensure they get the most appropriate Colorado mortgage loan.

When out shopping around for a Colorado mortgage quote, borrowers will hope to find a decent lender with low rates. Don’t be convinced that this is the only important factor to consider though, the lowest rate isn’t always the best person to get your mortgage loan off. When you’re deciding who to go with you should consider the following factors.

- The fees involved.

- The closing cost. They can differ widely between the various mortgage lenders.

- The diversity of products available in the Colorado loans.

As you look around you’ll soon notice that there are countless loan programs to choose from. Dedicate a little extra time and have a good thorough browse through the available options before you decide which mortgage quote is the best for your circumstances. You should pay particular attention to the length of the term and whether it falls in the fixed or variable category.

Customer service. Have a look for the best customer service. This is important since you’ll be dealing with the company for many years to come. Consider the skills of the employees and their promptness in answering and returning your calls.

The Colorado mortgage quote broker you deal with should be professional and have the ability to convey his words and the vastly different areas of the loan you show interest in. He should also be able to answer all the queries you present in good time.

There are hundreds of brokers through the nation who want you to become their customer. You’ll see their adverts everywhere you go, newspapers, television, radio, yellow pages or even on bill boards. There are lots of lenders to be found online too. Have a good browse around and consider all the alternatives.

Online lenders are excellent for providing lots of quotes with very little effort. You don’t even need to leave the home to gain a fast quote. Don’t allow the internet to replace real people though, you want to get face to face in real time to really thrash out any concerns before they become crippling reality. Ultimately, you need to do a whole lot of research. Check online, phone around, visit the brokers.

Do everything in your power to ensure you get the right mortgage quote that suits your needs perfectly.

Learn more about a second mortgage at Colorado Second Mortgage

Second mortgage repayment terms can vary considerably, so it is important that you look around for the one that is best for you. For the most part they range in length from 2 to 20 years, with the majority of second mortgage loans being 5 to 10 years. The majority of second mortgages are paid back in equal monthly payments with a portion of the payment going to interest and a portion to the principal balance. However, some are different such as those known as interest only mortgages. In that case your monthly payment will go only towards interest and the entire principal will be due at the end of the second mortgage term.

Second mortgages are called subordinate because, if the loan goes into default, the first mortgage gets paid off first before the second mortgage. Thus, second mortgages are riskier for lenders and generally come with a higher interest rate than first mortgages. It is often considered risky for the borrower too because it can lead to foreclosure when a homeowner defaults on his/her loan. The second mortgage lender then purchases the primary mortgage and then forecloses which leaves the homeowner losing their home to the 2nd mortgage lender.

Generally, when considering the application for a second mortgage, lenders will look for pointers such as significant equity in the first mortgage, low debt-to-income ratio, high credit score and solid employment history and so on. The main issue with this is that the lender expects you to pay the money back on time. Sometimes getting a second mortgage can be advantageous. It is important to know exactly what you are getting yourself into before moving forward with this process.

There are many good second property mortgage offers around, provided you know how to choose a suitable option and provider. If you are unsure you can always seek the help of a specialist broker who can advise to get the best deal possible. While you will have to pay for the services of the broker, you could in the long run save yourself a lot of money in case you make a huge mistake by doing it alone.

There are also many mortgage companies online that can help you find direct mortgage lenders and home loan brokers that will best suit your needs. This is a quick way to find a good mortgage loan and compare rates and offers from multiple lenders. When lenders compete for your business, it works to your advantage.

In order to get the best deal on your mortgage loan, you will need to understand certain things such as points, interest rates and closing costs. A point is amount that a borrower will pay in order to reduce the interest rate on their mortgage. One point is generally equal to 1% of the loan amount. Some lenders will advertise very low interest rates, and only when you read the fine print will you learn that you will have to pay points in order to get them.

With a mortgage loan, all interest is front-loaded, which means that for the first few years, every payment that you will make will go mostly toward the interest. Closing costs are predetermined fees charged for closing the account. These are determined by the type of loan you get, and the area where you live. Your lender is required by law to inform you of any closing costs beforehand.

For reading more second mortgage related articles, please visit second mortgage

The first mortgage is paid before the second one, making it more of a risk factor. In most cases a second mortgage takes the form of a home equity loan. Generally when you apply for a second mortgage lenders look for these 4 things; significant equity in the first mortgage, low debt to income ratio, high credit score, and a solid employment history.

Most lenders look at the equity of the first mortgage on the property to determine if they will lend you the money for your second mortgage. If you have a good equity in your first loan then you should have an easy time finding a lender. Significant equity in your first loan will most certainly ensure someone will loan you for your second mortgage.

Another thing that you need to get a second mortgage is a good debt to income ratio. For example, if you make $2000 a month, and have $400 in mortgage expenses, $200 for insurance, and $150 in taxes then your debt to income ratio would be %37.5. Determining your debt to income ratio is fairly simple, and free. You compare all of your housing debts, including your mortgage expenses, taxes, and home insurance, compared to how much your monthly income is. So, take your monthly expenses and your monthly income, and divide them.

In addition, having a high credit score will help you secure a second mortgage. Credit scores are determined by a few factors. Your past credit uses, the number of times you as for credit, and your past delinquencies all are factors that determine our credit score. The higher your score is, the better it is for you. Credit scores ranges from 300-900, most people are in the 600-700 range. To secure a second mortgage you would want your credit score to be at least 500, but it should be 600-700.

Lastly, a solid employment history places a part in getting a second mortgage. For example, if you tend to move from job to job frequently, then you will be quickly over looked for getting a second mortgage. If you happen to hold on to jobs for years at a time, then you will have an easier time getting second mortgage. For example, if you held your first job for 5 years, and you are in your second job for your 6th year, then you should be set to get your second mortgage.

All in all, a second mortgage is an option many people look to use. Before you try to get a second mortgage in Colorado, check the above things, and make sure you will have a good chance of getting the loan.

Learn more about getting a second mortgage at Second Mortgage Colorado