A second mortgage helps you to access the equity in your home. The second mortgage is placing another home loan (or lien) on the same property. Obtaining this loan is a way to gain additional funds, but before doing so, understanding the process is essential. If you have had your mortgage for years, then your home value is likely to be greater, and the amount outstanding on your loan less. Therefore, a second mortgage enables you to obtain this capital. You may borrow more considerable sums as the loan securing this is against your property. Additionally, the interest you will pay is less than other forms of borrowing.
By taking a second mortgage, at the time of property sale, the first mortgage gets paid out first (as this second loan is ranked behind the first loan) and the remaining funds will pay off the second mortgage. To enable qualifying for a second mortgage, you must seek permission from your existing lender.
What is the difference between a home equity loan and a second mortgage?
A home equity loan is a revolving line of credit. The lender opens the credit line, with the equity in your home being the guarantee. A line of credit means that you can borrow up to a certain amount and then pay the lender the agreed scheduled payments. From this perspective, this is comparable to a credit card, however, if payments are missed your home may be at risk.
A second mortgage is paid out as one lump sum with the term of the loan already set. Unlike an equity loan, once the loan is settled, you would need to reapply for another loan if you wish to borrow against the equity in your home again. Second mortgages tend to be a short-term loan of 1 to 12 months. Once again, it is essential to avoid missed payments. These types of loans may be used for many reasons such as debt consolidation or renovations and repairs to your home.
Can I qualify for a second mortgage?
If your home’s valuation is more than your current obligations on your mortgage, you may use that extra equity to take out a second mortgage. Many lenders can place tight limits on borrowing and restrict the LVR from 60 to 75% however; Prime Finance will loan up to 80% of LVR. (loan to value ratio)
Is it a good idea to take out a second mortgage?
Along with better rates and loan terms than an unsecured loan, a second mortgage can be an appealing way to meet other living expenses. You may need to consider a second mortgage after carefully assessing how the additional debt will affect your financial wellbeing. That said, in some circumstances, a second mortgage (or second trust junior lien) can be prudent and genuinely save you money.
If your first mortgage is a fixed interest loan, you will not need to worry about expensive exit fees, while still being able to unlock some of the equity in your home for your needs.
Prime Finance has an expert and professional team who will spend the time to understand your requirements.
Is it better to refinance or get a second mortgage?
If interest rates are low then refinancing may be a useful option, however not all home loan products may have the benefits of your existing higher rate loan. When you refinance the mortgage on your home, you are obtaining an entirely new loan. As a consequence, this means that you will have to go through the entire process of getting a mortgage loan just as you did when you originally purchased your home, and there is a possibility that the rate may be higher than the original debt. It can be more comfortable and less expensive to obtain a second mortgage. In the event when rates have gone up, taking out a smaller second mortgage may make more sense than refinancing everything at a higher percentage. Closing costs may also be less as the second mortgage amount has less money involved.
Prime Finance offer less expensive options to finance your second mortgage as opposed to refinancing your property.
Do you need good credit to get a second mortgage?
Because your home collateral is used for your second mortgage, your credit score may hold considerable significance. A low credit score can influence your interest rate with some lenders. Prime Finance can offer many options and contingencies to help you make your decision.
As a guide, Prime Finance offer 1% per month interest rates.
What credit score do you need to get a second mortgage?
Your ability to systematically manage credit and repay debt is one of the ways that can influence how your credit score is calculated. Understanding what establishes a good credit score as well as the ways that you can improve your score is vitally important in today’s financial world.
Even if your credit score is not ideal, our professional consultants will endeavour to provide approval for your finance.
Prime Finance offers many flexible solutions for second mortgages. Being private lenders, we can provide fast and sensible solutions for your situation.
Is it easy to get a second mortgage?
Many lenders make application for a second mortgage very time-consuming to apply for because the lending criteria are involved, and mistakes can also result.
Prime Finance will make your application quickly and assuredly, with a prompt reversion in 3 to 7 days. Their experienced team will ensure the process flows effortlessly.
Does a second mortgage hurt your credit?
Major concerns that negatively impact your credit rating are missing repayments or late repayments on your home loan and credit cards for instance. If your credit and employment status are robust and you manage your debts responsibly over a length of time, this can be very positive for your credit score.
Universally, credit is the trust or belief that you will repay the money you borrow. You are said to have favourable worth when lenders believe you will repay your debts (and other financial obligations) on schedule.
Prime Finance are specialised lenders and can customise a loan precisely for you.