How does a second mortgage work?
Answer:A second mortgage works the following way - it is a loan establishing a lien on the deed of property on top of the existing first mortgage lien. A second mortgage provides a quick way to cash the built-up equity in your home for any purposes.
A second mortgage may be used in a variety of ways such as consolidating high interest payments, combining bills, and saving on interest as usually it is tax-deductible. The amount to borrow with a second mortgage will depend on the lender and on your credit. Some lenders will allow for 80% of the available equity, others will allow for doing over-equity.
A second mortgage will usually be fixed-rate, simple interest loan and term will range from 2 to 20 years. The second mortgage may amortize fully, or have a balloon payment scheduled at the end.
Our advice: Be sure to ask your lender about FHA loans. FHA loans have very competitive interest rates because the loans are insured by the US Federal Government. Even if you have had serious credit problems, such as bankruptcy, it is easier to qualify for an FHA loan than a conventional loan. Also, taking an FIXED rate loan while the interest rates are still low is a smart idea. Check your eligibility here:
| Not at all | Definitely |
Mortgage QnA is not a common forum. We have special rules:
- Post no questions here. To ask a question, click the Ask a Question link
- We will not publish answers that include any form of advertising
- Add your answer only if it will contrubute to the quality of this Mortgage QnA and help future readers
Common misspellings: mortage and morgage