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Second Mortgage Tips

Nov 5, 2007
When it's time to find a second mortgage on your home, the time you spend looking for the right mortgage at the best rate can really pay off. There are lots of reasons someone might want to get a second mortgage. You could want to lower the amount you pay per month, consolidate your debts, build up some equity on your home, or get out of your first mortgage a lot faster. It doesn't matter why you're looking for a second mortgage. What matters is paying attention to the important factors than can affect your mortgage.

The first thing you should pay attention to as part of your search for a second mortgage is your lender. There are a number of different kinds of lenders, including commercial banks, specialty mortgage companies, thrift institutions, and credit unions. They'll all have different terms and prices. The trick is finding out which one is right for you. You can also choose to use a mortgage broker for your second mortgage. These brokers can help you find a lender, and will use their experience to make sure you get the right one for your situation. If you do decide to use a broker to find your second mortgage, be sure to check with several. Different brokers will allow you to find the best deal.

In addition to choosing the lender, another consideration you should pay attention to is price. There are a number of different costs you should keep in mind when you look at all the possibilities open to you. One of these is the interest rate that you'll be charged on your mortgage. There are a number of different types of interest. Fixed interest is the most traditional, but there are also adjustable rates, which fluctuate periodically. Look at how much your interest rate might vary, and take this into account when you plan.

You'll also have to pay attention to the mortgage's APR, or annual percentage rate. This can include information like the interest rate, points, credit charges and broker fees. There are also fees included in many loans, such as transaction costs, underwriting fees, closing costs, settlements and broker fees. Many of these fees will be together in one lump sum, but it's useful to know how much each specific fee is in addition to the amount to which they add up. Some loans don't have these fees, but will have accordingly higher interest rates to make up for this.

Another thing to watch when you take out a second mortgage is the size of the down payment. Ordinarily, this is about twenty percent of your home's purchase price. You might be able to get a lower down payment with some mortgage companies or brokers. You can also make a small down payment, and then purchase mortgage insurance, which protects the lender if you're unable to pay. Some mortgages will require that you buy this insurance. If this is the case with the mortgage you're looking into, be sure to find out how much the payments on this insurance will cost.

Bad credit can make it hard to get a mortgage, but it's not impossible. If you find the right lender, and communicate to them what's wrong with your credit report, you may be able to get a favorable rate. Be sure to find out how your credit history will affect your loan to get the best deal that you can. The Equal Credit Opportunity Act ensures that lenders are unable to discriminate against borrowers because of a disability, their age, or their gender or ethnicity. If you feel that you're being discriminated against, you have the right to get in contact with the appropriate officials and report the lender for this violation.

When you look for a second mortgage on you home, be sure to consider all the important factors, including the reason you want the mortgage as well as the rates and costs you'll need. That way, you'll be sure to get the right mortgage for you at a cost you can afford. Be sure to go to your prospective lenders and find out what information they'll need to offer you a good rate. This ensures that you'll get the best rate on your second mortgage.
About the Author
Ken Black is the owner of many financial websites. Visit Mortgages 101 to learn more about home mortgages .
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