An introduction to 2nd Mortgage Loans

An introduction to 2nd Mortgage Loans

 A mortgage loan is nothing more than taking a loan from a lending institution against the property as the collateral of the loan. What this therefore means is that if you don’t manage to pay back the loan in full, your lender is permitted by law to foreclose on the property and sell it in an effort to recover the loan, plus accrued interest and all else related to the mortgage. If you take a second loan on the same mortgaged property, the process is known as second mortgage loan. For you to be able to get the best possible second mortgage loan, you need to know exactly what a second mortgage rate is.

A second mortgage loan comes in handy during emergency financial situations, say when you have to cater to an emergency medical need, perhaps pay school fees, or are already paying high rates of interest and want to reduce. Note however that a second mortgage loan can accumulate and add up to your monthly mortgage payments, hence you need to make an informed decision since the interest rates on second mortgage loans tend to be higher than those on a first mortgage loan.

The process of taking a second mortgage loan is pretty much the same as that of a first mortgage loan. Your new mortgage lender will expect you to present all relevant documents related to the property in question and should be accompanied by the current asset value. You will also need to have a new appraisal form field. Upon close scrutiny and examination of all paper work, the new lender will decide on the amount of mortgage loan that you qualify for and at which rate.

You should know that there are two types of second mortgage loans available in the market today. Fixed interest rates mortgages and variable interest rates mortgages. They are pretty much the same as those of a first mortgage loan in that in a fixed interest rate type of mortgage loan, the interest rate remains constant throughout the loan term. Generally, fixed rate mortgage loans tend to take longer than their variable or adjustable rate mortgage loans whose interest rate fluctuates with the changing times. The interest rate is changed periodically by the lender; hence such loans are suitable for short term periods of time.

In either type of second mortgage loan, the interest rate must be higher than that of the first mortgage loan because more often than not this second loan has a high risk as per the lender’s point of view, since the odds are quite high that the second mortgage loan may not be paid back in full.