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Second Mortgage Lender
from: Mortage & Debt FactsGetting a mortgage on your home is a huge step. It's probably about the largest financial step you'll take in your lifetime. It's a debt you'll have for a long time with possible large payments.
In fact with the high cost of real estate, most mortgages result in large payments. Surprisingly enough, there are many people today that wind up taking out a second mortgage on their home, which puts them in need of a second mortgage lender. A second mortgage lender should be the same person you used for your first mortgage unless you aren't comfortable with that same lender. The reason for this is that your first mortgage lender has all the paperwork still in your file on your mortgage loan, thus preventing a lot of same things having to be done again.
There are different reasons why people will require a second mortgage lender. Of course, it's because they are getting a second mortgage on their home, but the reasons may vary.
When you take out a mortgage on your home, most banks will only borrow up to 80% of the value of your home. So on a home valued at $100,000, they will borrow you up to $80,000 to buy this home. A few years later, the balance of your loan has decreased because of your many payments, whereas the value of your home has increased. You find yourself in need of some extra cash for a large vacation or to put your child through college.
A second mortgage lender can help you take a second mortgage out on your home to give you that cash you need. If your first mortgage balance is down to $60,000 and the value of your home has increased to $120,000, you will have some equity in your home to borrow from.
With your home valued at $120,000, the second mortgage lender will borrow up to approximately 80% of that value, which is $96,000. However, since you still owe $60,000 on your first mortgage, you'll only be eligible to borrow $36,000 on your second mortgage, which is still a lot of extra cash to help out! The only disadvantage to this is that you now have two mortgage payments to make each month rather than one.
An advantage of a second mortgage is that a second mortgage is not going to be as large as the first. Some people prefer to just refinance their first mortgage to get the extra cash. There is a disadvantage to this, however. If you've used money for a vacation or small home purchase, you may not want to be paying on this for 25 years or however long your mortgage is for.
With a second mortgage, you can have the second loan paid off sooner. When you speak to a second mortgage lender, they will advise you of the best way to proceed to help you the most.
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