home loans – mortgage refinance second mortage

October 22, 2011

An Introduction to the Second Mortgage Loan

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An Introduction to the Second Mortgage Loan

Learn the difference between a home equity loan and a home equity line of credit. This introduction also explains the best uses for these loans and your legal rights if you change your mind.

Description

The term “second mortgage loan” is not oftentimes used by lenders anymore. The traditional second mortgage is today more unremarkably called a home equity loan. A home equity line of credit is besides adverted to as a second mortgage. Both loans are supported by the equity in your home, but there are differences between them.

Home Equity Loan

The home equity loan is similar to the traditional second mortgage your parents may have had. Equity is the difference between the current market value and the principal balance of the mortgage loan. A home equity loan uses that difference as collateral for a second loan against your home. It doesn’t replace a first mortgage. Because it will be the second debt paid if you default on your loans, it has a higher interest rate than a comparable first mortgage. Most home equity loans have a fixed rate, although some are offered as adjustable rate mortgages. With a home equity loan second mortgage, you receive a lump-sum payment in cash and then repay the loan over a fixed period of time.

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Home Equity Line of Credit

A home equity line of credit (HELOC) also uses the equity in your home as collateral. Rather than a fixed sum of money, your lender issues you a credit line with a fixed limit. You access the money by writing checking or using a charged card linked to it. HELOCs have a variable interest rate that is based on the current prime rate plus a percentage. You may borrow funds any time between the issuance of the credit limit and its expiration date, which can be anywhere from three to ten years. Your repayment terms and amounts vary depending on the amount borrowed and current interest rate. Most HELOCs require you to remove an initial sum and not repay it until the line of credit expires. Most also require a minimum withdrawal each time you access the funds.

How to Use a Second Mortgage

Regardless of which type of second mortgage loan you choose, second mortgages should only used to:

Make home repairs

Remodel your home

Pay education expenses for you or your child

Reduce other debts

In other words, a second mortgage should be used to improve your child’s or your financial future. It should not be used for non-real estate investments or purchases of consumer goods like televisions, cars, boats, or other big-ticket items.

Second Mortgage Right of Rescission

You have three business days, not including Saturdays, Sundays, and legal holidays, from the date you sign your home equity loan documents to cancel the loan without cost to you. The loan must be against your primary residence. If you used the same lender as your original loan, then you only sufficed for rescission if you increased the amount of your original lend with a cash-out refinance or took out a house equity loan. You can rescind any mortgage refinance or home equity loan within the three day period if you used a different lender.

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October 5, 2011

Truth About Second Mortgage and HELOC: Are They One and the Same?

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Truth About Second Mortgage and HELOC: Are They One and the Same?

A lot of people often confuse second mortgage with home equity loan. While both are associated with each other, they have their own benefits. But distinguishing one from the other should not be difficult.

A second mortgage is a type of home equity loan. Equity refers to the difference between the current appraised value of your home and the amount you have paid towards the first mortgage. The amount you tin borrow on a second mortgage is usually based on the difference between the current value of your home and the odd principal balance on your first mortgage. The second mortgage is an effective means of tapping the asset value of your home so that you tin meet your financial needs and skirting acquiring high engrossed unsecured debt like the one offered by credit cards.

Generally, one tin get a second loan wherein the total loan-to-value ratio of your first and second loans equals 85 percent of your homed appraised value. On the other hand, there are lenders in almost all states that allow you to take out a second mortgage that equals to 125 percent of the appraised value of your home.

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Second mortgages usually have a fixed interest rate that runs.  Also, it is usually a 15- to 30-year loan. As with the initial loan, the rate of interest and points for a second mortgage will be based on credit history, home price, and the current interest rate. The second mortgage may have a higher interest rate, but the fees are typically lower.

Furthermore, second mortgages are also used to pay out a fixed sum of money to be repaid on an appointed schedule. People who are in an emergency situation usually opt for a second mortgage. This is because when you get approved for such mortgage, you will receive a lump sum, which you can use for expenses like roof repairs and home renovations. You may also use the money from your second mortgage for expenses not entirely related to house expenditures, like school tuition, car repair, vacations, debt consolidation and early financial needs.

Home equity loan is different. This is used to refer to a home equity line of credit (HELOC). A HELOC is often revolving and is similar to a credit card, wherein the interest is charged, and the amount you are allowed to borrow is based on your creditworthiness. Like the second mortgage, a HELOC may be used for any type of expense, but anything that is paid back above the absorbed owed will be returned to the account and can be used again when needed.

Usually, home equity line of credit loan has a term of up to 15 years. If you sell your home before you have repaid the line of credit completely, you will then have to do it upon completing the sale. This feature is applicable to both the HELOC and the second mortgage. In determining the limit of your HELOC, lenders examine your homed appraised value and start calculations at 75 percent of that value. They then deduct the remaining equilibrated owed on your mortgage.

Your current financial needs will aid distinguish the type of loan that is appropriate for you. For one-time expenses, you can opt for a fixed-rate second mortgage. But if you have a sponsor need for extra money, a HELOC would be right for you.



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September 25, 2011

How do second mortgages work?

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September 22, 2011

Things You Should Know About Second Mortgages

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Things You Should Know About Second Mortgages

A second mortgage is an additional mortgage on a property where a primary mortgage already exists. They are secured against the same equity as the first mortgages. Therefore is based on the property’s current value and the amount that is still owed. They are often granted by the lender of the first, but can be obtained from a different lender.

When choosing a second mortgage, there are typically three different types available. A traditional, where there is usually a fixed rate, and a term of 15- 30 years; a home equity line of credit, where the rate is typically adjustable and the funds are drawn as needed; and a home equity loan in which the borrower uses the equity of their home as collateral.

In a home equity loan, the equity of the home is usually reduced. To help determine which loan type is best, it is wise to speak with a competent mortgage broker.

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In most cases, these mortgages are loaned at higher rates than those of first mortgages. The reason for this is due to the fact that the lender of the second mortgage is entering into a higher grade of risk. This increased risk does not directly correspond to the credit of the home buyer, but rather to the availability of funds the mortgagee can claim.

In the event of a default the property is sold, and the proceeds are applied to the repayment of the loan amount. Primary mortgages always take precedent over secondary mortgages; therefore mortgagee’s have to await settlement of the first mortgage before any left over proceeds can be claimed.

This is what defines the second mortgage as a higher risk mortgage. In these mortgages not only is there a higher interest rate, but the second mortgage is also written for a shorter term than that of the first mortgage. Therefore, it is important to take appropriate precautions to ensure that the mortgage can be repaid on time.

This risk should always be carefully weighed when any mortgage, whether first or second, is being sought. A second mortgage can help relieve stress from financial crisis. A second mortgage can allow access to a home’s equity. It is often acquired to make repairs or enhancements on a home, thus increasing the value of the property.

However it can be used for other non-related financial situations, such as paying off college tuition or lowering your debt load.




Expand the description and view the text of the steps for this how-to video. Check out Howcast for other do-it-yourself videos from ssproductions and more videos in the Home Finance category. You can contribute too! Create your own DIY guide at www.howcast.com or produce your own Howcast spots with the Howcast Filmmakers Program at www.howcast.com If you have large expenses coming up, a second mortgage may be a viable option. Here’s how to apply for one. To complete this How-To you will need: A home appraisal A computer with internet access A credit report Your gross monthly income Mortgage lenders Step 1: Get an appraisal Contact a real estate broker for an appraisal of your home, or search online for “home appraisal” for a free estimate. Step 2: Use credit score to determine interest rate Request a copy of your credit report from annualcreditreport.com.You are eligible for one free credit report per year. Visit a lender to receive your credit score, and to estimate how much interest you will be paying for your second mortgage. Expect lenders to offer lower interest rates if you have a high credit score. Tip: Check your credit report carefully, and dispute any errors in writing to the credit reporting agency. Step 3: Know your future plans Know your future plans. Be aware of market downturns when you plan to sell your home, or you risk losing equity if the housing market drops and are forced to sell at a loss. Step 4: Assess your situation Determine if you can afford a …
Video Rating: 4 / 5



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September 19, 2011

What to Consider When Taking Out a Second Mortgage

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What to Consider When Taking Out a Second Mortgage

A second mortgage, also known as a subordinate mortgage, is the second loan you take against your property. A second mortgage is typically offered with a higher rate of interest in comparison to the rate on the first mortgage. This is because, in the event of a default, the first mortgage is first paid off from the home sale proceeds and the balance is paid towards second mortgage repayment. Here are some things homeowners should consider before going for second mortgages.

 

Intensity of need

 

The first thing to be carefully considered when taking a second bond is the need for it. Do you really need to take a second mortgage or can you settle with other low-risk financing options? Answer this question by taking into account the purpose of the loan, the amount you need and your repayment capacity. Remember never to borrow more than your property’s worth, even though it is tempting to borrow a large sum of money that can be used for practically anything. Interest rates

The next thing to consider is the interest rate on the second mortgage, which is considerably higher than the rate on your first mortgage. Compare the interest rates being offered by various banks and credit unions and go for a lender who offers the most the competitive rate of interest.

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Choosing a lender

 

Ideally, it is wise and convenient to choose the same bank or credit union that you have your 1st mortgage with because of the possible trustworthy relationship you partake with them. However, you should look at other fiscal institutions if you are not happy with the services of your am lender/bank or do not want to continue with them for any other reason.

 

Terms and conditions

 

Read the terms and conditions very carefully before signing your second mortgage agreement. Some of the banks offer payment options called ‘balloon payments’ where your installments are smaller in the beginning and are greatly inflated towards the end of your loan period. Understand the mortgage related terminology clearly so that you don’t face any problems during the course of your loan term.

 

Prepayment and default policies

A lot of banks have unfriendly prepayment policies on second mortgages, which enable them to charge a penalty if you pay off the loan before the specified time period. Check if the second mortgage comes with a prepayment penalty and keep an eye on your repayment track, even if you are prompt in paying your installments, as it is quite possible that you could end up on the defaulter’s list because of a clerical error on the bank’s front.

 

Application and insurance costs

Take a close look at the costs associated with taking out such a mortgage and determine whether it is worth the investment. Also check if there are any voluntary insurance policies, which you may not really need, being offered with the second mortgage. If you are not vigilant, you might end up paying more than necessary, resulting in an expensive loan.

 

Understand how second mortgages work and assess their pros and cons when you decide to tap into your home equity for the second time.





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September 14, 2011

Subprime Mortgages & Second Mortgages

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Subprime Mortgages & Second Mortgages
The subprime mortgage industry has been a common topic of current events over the past 4 years. Yet the average home owner with mortgages didn’t understand the financial contracts to which they signed on. There are many lessons to be learned. In order to comprehend one must understand the economics of banking and finance.
So how did the subprime lending industry get its start? As mortgage rates dropped and home buying became wildly popular, many potential homeowners sought financing but were turned away from traditional banks and mortgage lenders. The practice was justified because it allowed borrowers with an imperfect credit history to receive home loan financing. First, with rising property values, the borrowers were able to gain equity despite paying less than the fully amortized payment or interest-only payments each month because of perceived appreciation.
The most common type of subprime mortgages was adjustable-rate mortgage (ARM)
A mortgage whose interest rate changes periodically based on the changes in a specified index.
At the beginning the interest rate was low but the promissory note stated that the interest rates were not fixed but fluid. In other words, they were adjustable. Also included in the promissory note was the schedule when the rate would adjust or rise. This is known as the adjustment date ]]> The date on which the interest rate changes for an adjustable-rate mortgage (ARM).
In the 1980s, state usury rate ceilings were elevating, creating an overall new market for people who previously couldn’t qualify. At higher interest rates, fees, and other add-ons they did. Most borrowers got so-called “2/28″ and “3/27″ interbred adjustable rate mortgages (ARMs). They originated with low fixed “teaser” rates, good for a two-year period. Afterwards, they’re reset semi-annually based on an interest-rate benchmark, or the current going rate. For many holders, payments soared 30% and became unaffordable, and by 2004, 90% of subprime loans were these type ARMs. It was swollen-known in the industry that “these borrowers (are) most likely to default or become delinquent (and) face foreclosure.” The idea was to cash in and let holders take the pain.
Ameriquest was a textbook example of this. They provided what they called the 227 and 327 loans, which were a fixed rate for two years or three years and then for the rest of the loan. And once they adjusted, some borrowers understood they were getting an adjustable rate, but they were told that the rates could go down.
Second Mortgage
Corresponding to the subprime market was the Second Mortgage market. This catered to those with higher incomes and good credit. They already were in debt to their first mortgage. Most consumer debt today is the result of falling into arrears with their payments to the interest rates of having two mortgages. What exactly is a Second Mortgage?
Second Mortgage is a loan taken out against your home after you have already taken out a first or primary loan. The equity you have in your home is used as collateral for the second loan.

A second mortgage has second priority after the first mortgage. So, if you default on both loans, you need to repay your first loan prior to paying off the outstanding balance on the second.
A second home loan allows you to borrow based on your home’s equity. The amount of equity you have in your home is the amount of the loan(s) you have paid off, i.e., the amount of the home you own outright.

With most lenders, you can take a second loan so that the total loan-to-value ratio of your first and second loan is equal to 85% of the home’s appraised value.
Interest on a second loan will be higher than with a first loan. This is primarily because if you default, you will be paying off the first loan before the second, and as such there is a higher risk involved in offering second mortgages.





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September 12, 2011

What Interest Rate Should I Expect to Pay on A Second Mortgage

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What Interest Rate Should I Expect to Pay on A Second Mortgage

The interest rates on Second Mortgages are typically higher than those of First Mortgages. This is primarily due to the increased risk for the Second Mortgage Lender.

Simply, in the event of default, the Second Mortgage holder would only recover his funds from the proceeds after the First Mortgage was satisfied. In addition to the First Mortgage any Municipal Taxes due, Legal Fees Payable and all Processing costs would have to be paid as well, before the Second Mortgage lender would receive any funds to satisfy the Second Mortgage. In some cases of default the Second Mortgage lender may choose to assume the First Mortgage to protect his interest in the property. This will be not only time consuming but costly for the Second Mortgage lender.

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The Interest rates determined by both Institutional and Private Lenders on Second Mortgages will be based on many underwriting criteria.

• Credit History of the applicant
• Income
• Location, Type and Condition of Property
• Debts that may remain after the Second Mortgage is in place
• The total Loan to Value (LTV): the total amount borrowed as a percentage of the value of the home

In the case of a homeowner who has good credit, stable income, acceptable property, low debts and just requires, let’s say, a Line of Credit. They should have no problem in securing a loan to 80% of the homes current value and should expect an interest rate close that of a First Mortgage or Bank Prime.

However, a homeowner who may have weak credit, less stable or verifiable income, outstanding issues such as tax arrears or credit collections may expect to be able to secure a Second Mortgage loan to 65%-85% of the home current value with an interest rate similar to that of consumer loans.

And finally, a homeowner who simply needs the lender to overlook all the underwriting guidelines and lend the money solely on the Equity in the home may expect to be able to secure a Second Mortgage loan to 65%-85% of the home current value with an interest rate similar to that of a consumer credit card.

Knowing what your up against prior to taking your second mortgage would definitely make the experience more fruitful and lighter for you.

 

 





September 8, 2011

Toronto Second Mortgage ? Second Mortgage

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Toronto Second Mortgage ? Second Mortgage

Many people won’t consider a second mortgage because it might with a risky alternative. But looking with its positive features it is not threatening as what others suppose it could be. If accomplished accordingly, it can be your assistance to succeed in getting your strength back once you are trapped in the middle of a fiscal catastrophe likely if you’ll deal with Toronto second mortgage.

One thing you must do is to transact with this cautiously. Making it certain that you are highly aware of what you are dealing with as well as the advantages and disadvantages before coming across with your decision.

What is a second mortgage?

Second mortgage is the secured loan or mortgage that is subsidiary towards an additional loan adjacent to a similar property and to be precise it is also called as a home equity loan. The system goes like this; the sum that you’d be able to lend is computed according to the difference between the outstanding principal balance from the initial mortgage and your house’s existing market cost.

You can actually acquire a number of mortgages and there are possibilities for third and fourth mortgages however it seldom happens because it can create greater risks of financial burden in the near future.

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This is also known as a subordinate since if the loan goes into failure; the original loan gets paid off first which means that higher threats of financial burden are likely to occur with higher interest rates compared to the previous mortgage.

When would you opt for second mortgage loans?

Considering that you can avail several mortgages, it is not necessarily needed to take this opportunity. This might just be helpful if you badly need the money therefore it is better to complete all your payments for existing loan before getting a new one to avoid being drowned with debits and obligations.

However, you can benefit from it in times of needs like supporting expenses for home renovations and repairs. For an instance, you are in the middle of paying your existing mortgage then a sudden accident happen; a part of your house needs to be patched up but you have nothing to spend on it, by this moment acquiring a second mortgage could be your suitable option.

You can also get a second mortgages Toronto if you are going to use it with important matters that can’t wait any longer, for example acquiring a loan for educational purposes for your children or for an emergency that you have nothing to pay out with.

If there are advantages, there are some disadvantages accompanied by a second mortgage as well. Just like any form of debit the risks of getting in debt could happen. Luckily you can avoid these advantages to happen, prevention is always better than cure! If you can avoid getting a second mortgage, you don’t have to do so.  If you really need to make it certain that you know all the consequences that you might encounter. Be aware of the provisions to assure that it is really worthy and would not bring threats to your family and properties. As a home equity loan, your home serves as the collateral and once you did not meet up the conditions provided your home will be taken away as the payment. No one would like to lose their home right?





September 1, 2011

Find the Best Bad Credit Second Mortgage

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Find the Best Bad Credit Second Mortgage

Nobody ever intends to end up with bad credit. When you decide to consolidate your credit card debt and student loans or make home improvements and realize your credit is not what you had hoped, it can be a big blow. The good news is that you still have options. A secured loan or a loan secured against some kind of collateral is easier to obtain for people with bad credit than an unsecured loan. However, remember that a loan secured against your home means that the lender takes your property if you cannot make your payments, so be sure that you need and not just want that loan.

Types of Bad Credit Second Mortgages

Just like a second mortgage for people with good credit, you have two choices:

* Home equity loan

* Home equity line of credit

Both loaned are determined based on the amount of equity that you have built up on your home — the amount that you still owe on your mortgage subtracted from the total value of your home. When people think of a second mortgage, they are usually thinking of a home equity loan, in which the borrower receives in a lump sum, usually at a fixed interest rate. A home equity line of credit or HELOC tinned be used more like a credit card, with the borrower able to withdraw smaller amounts over time. With a home equity line of credit, your payments against your balance open up your credit reserves for you to borrow against again.

Home Equity Loan Pros ]]>

Obtaining a second mortgage can be a wise choice even for people with bad credit if you can also use your loan to improve your credit score.

* Making your payments on time and in full on your mortgage can be one of the best ways to improve your credit score.

* Using your second mortgage to consolidate debt can be very wise. When consolidating debt be sure that you are paying off debt with higher interest rates than the rates on your second mortgage.

* Using your second mortgage to pay for education can help you to obtain a higher paying job that will make it easier for you to meet all of your obligations in general. However, if going to school means taking time off of work, you will want to be sure that you will be able to make all of you payments on your first mortgage and second mortgage or you may risk losing your home.

* Using your second mortgage to pay for home improvements can raise the value of your home. If you are making the improvement because you are interested in selling, be sure to bespeak the loan before you put your home on the market or it will be very difficult for you to obtain a second mortgage.

* Keeping your good interest rate on your first mortgage can be a good reason to get a second mortgage as opposed to refinancing your first mortgage with cash out. You may end up with a high interest second mortgage, but in the end, you will be saving money.

Home Equity Loan Cons

You always want to do your research when you take disclose a loan. Be sure to consider these cons before you put your home on the line.

* If you are already struggling to make your current mortgage payment, adding another monthly responsibility may damage your credit further and cost you your home.

* You may be able to get a better interest rate refinancing your current mortgage that you are able to on a second mortgage. First mortgage rates are usually lower than those on second mortgages and if you can get a lower interest than you currently have, a cash-out refinance may be a better option for you. Be sure to shop around before you make your final decision.

* Lenders may try to take advantage of your poor credit history in order to take your home. Make sure that you understand all of the terms of your second mortgage loan. Balloon payments, which require you to pay the full balance at the end of the term or the fluctuating rate of a HELOC, may put your home in jeopardy if you are unable to make your payment to your lender.

Even with bad credit, you can get a second mortgage, but be sure to investigate all of your options before you sign on the dotted line. For more articles on Bad Credit Second Mortgage, visit: http://www.bills.com/bad-credit-second-mortgage/





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August 26, 2011

Pros and Cons of Second Mortgages

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Pros and Cons of Second Mortgages

Multiple loans can be taken against a property, such as your home. The first loan taken against your home is called the first mortgage while the second loan is referred to as the second mortgage. Second mortgages are also called subordinate mortgages as they the priority remains with the first mortgage, which has to be repaid first, in the event of a default. A second mortgage’s term length can go up to thirty years.

These mortgages have become quite popular among homeowners who want to cash in on the equity in their homes. But there are also some risks associated with such mortgages. Here are some of the pros and cons of a second mortgage that you should consider before making the decision to take one out.

Pros of second mortgages

A second mortgage gives you the opportunity to use the equity built up in your home for other financial needs. One of the most common reasons why people take out such mortgages is to pay off existing debt. Through a process called debt consolidation, you can consolidate all your high interest credit card debt into a low interest debt with more affordable monthly payments.A second mortgage can also help you avoid PMI or Private Mortgage Insurance, which is required when the loan-to-value percentage is more than 80%. You can replace the PMI with a second mortgage, one reason why it is also called a ‘piggybank loan’.By taking out a second mortgage, you get access to hard cash that can be used to make big purchases such as a car or property. You can also invest the money in money market instruments that guarantee good returns.Homeowners also take out a second mortgage to pay for college education or pay off substantial medical bills.Another popular reason for taking out a second mortgage is for home improvements and remodeling to enhance the house’s re-sale value.

Cons of second mortgages

A second mortgage is a secured loan, so you are effectively putting your home at risk should you neglect to repay the lender/bring institution. Take out such a mortgage only if you are confident that you will not default on your loan at any cost or else you may have to face a foreclosure. From the second lender’s point of view, a second mortgage is risky, as the first lien/mortgage will have priority in the event of a default. This is why a second bonded is offered at a high interest rate.In some cases, the mortgage fees and pre-payment penalties connected with such mortgages can be fairly high.

Lenders offering second mortgages will look at your credit score and employment stability before they approve the loan. It also helps if you have a substantial equity in your home and a low debt-to-income ratio. These loans are extremely welcome in times of big needs, but the option of taking them should be exercised after a great deal of thought and consideration.





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