Second Property Mortgages
If you have purchased a property with a mortgage, you will eventually build up equity in that home as you pay off the debt. The difference between the value of a piece of real estate and the amount owed on that property is the equity. If you have enough equity, you can borrow against it, using the equity as collateral.
What Is a Second Mortgage?: A second mortgage is a type of loan against the equity on your home. It does not affect the first or primary mortgage of your property. Each month, you pay the amount owed on your first mortgage and second mortgage until the loans are paid off in full. As you pay off both loans, you regain equity in your property.
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How Does a Second Mortgage Work?
You can get a second mortgage by going to a lender and applying. This second mortgage works much like your first. You have to apply and be approved. If you get the financing, you must make payments each month. This loan has a fixed rate and is for a specific term. Once that term is completed, your loan is paid off.
Second mortgages allow you to get money out of one of your biggest assets for a variety of uses. If you are getting a second mortgage for a second home purchase, you can use the money for a down payment, for example. You can use your home loan for medical expenses, home renovation, debt consolidation, education and a variety of other needs. Since the rates are lower than the rates for credit cards and other debts, second mortgages are popular methods of financing.
Second mortgages are less flexible than home equity lines of credit, which also use your home equity. Lines of credit are revolving debt, meaning you can pay off the debt and use the credit line again when you need to. In addition, with a credit line, you only take and pay interest on the amount you need when you need it.
For these reasons, second home loans are ideal for larger, one-time expenses such as tuition, a medical bill or a fixed rate renovation project. You can pay for these fixed-rate costs when you need to, and then pay the debt off with time at an advantageous rate, without having to lose out on the low interest rate you have secured with your home loan.
Before taking out a second home loan, consider what might happen if the value of your primary home decreases. You may end up owing more than the property is worth. In addition, having two debts on the same property can make it harder to move or sell. As you indebt more of your home, you also may have less equity for other projects and opportunities.
How to Get a Second Mortgage
At Assurance Financial, we pride ourselves on being the people people. We will answer your questions and guide you to the mortgage solution that is right for your situation. We can help you understand the rates, benefits and possible challenges with each mortgage. Since we handle processing in-house, you know you’re in good hands. We help you get approved fast and help you secure the financing you need.
Additional Second Home Mortgage Requirements
In order to apply for a second mortgage, you must have enough equity in your home to cover the amount of the loan. In addition, you must have cash reserves to pay for the appraisal fees, origination fees and any additional fees.
Lenders want to see you can repay the debt, just as with any loan. They will look at your credit score and will want to see reliable employment and a low debt-to-income ratio. Lenders will want to see pay stubs and other financial documents to evaluate how able you are to make payments each month. The better your financial situation, the more likely you are to get approval for a second mortgage. As with any loan, you may wish to focus on paying down debts and improving your attractiveness to lenders before you apply.
What to Expect for Second Home Mortgage Rates
Your second property mortgage uses your home’s equity as collateral. For this reason, second home mortgage rates tend to have lower rates when compared with unsecured debt such as credit cards.
However, second mortgage rates are still higher than the rate on a primary mortgage. This is because if you default on your property loan and the bank forecloses, the primary mortgage is paid first. The second mortgage is paid second if there are any proceeds left. This represents a risk for lenders. If the property falls in value, the mortgages may be more than the home is worth and the second mortgage may not be paid off in full. To offset this risk, the rates for secondary home loans are higher.
If you are wondering how you can leverage your home’s equity, you may wish to use a second mortgage calculator to see how much you may pay for an additional loan. You may also want to contact one of the Assurance Financial loan officers to discuss your options.
Apply for a Second Property Mortgage Today
Whether you want a second home mortgage for a down payment on a pied-a-terre in the city, a country house, a vacation home, a new car or anything else, Assurance Financial has a range of mortgage options that may be right for you.
Assurance Financial loan advisors are transparent and honest, helping you find competitive rates and monthly payments. As an independent lender, we don’t pass on your loan and your data. Instead, we handle end-to-end processing of your mortgage under one roof, which helps us stay responsive and fast. Our average 4.98 stars rating, based on thousands of reviews, reflects the care we put into every customer interaction.
At Assurance Financial, we believe it should be easy to tap into your home’s equity when you need to. We use the most current application technology to allow you to apply for a loan quickly.
As a full-service, independent residential mortgage banker, Assurance Financial is ready to help you get financing. We are Fannie Mae, Freddie Mac and Ginnie Mae approved. We also have every type of loan on the market available. Whether you need a jumbo loan, construction loan or any other kind of home loan financing, we can talk about them knowledgeably and offer the solutions you need.
Assurance Financial guides you to the right mortgage, no matter your life stage. Whether you are looking for investment opportunities, a vacation home, a secondary residence, an investment property or other opportunities, a second home loan allows you to secure the financing you need for your plans. Assurance Financial helps you secure the home loan you need to make your future goals a reality.
Reach out to an Assurance Financial loan officer today to find out how affordable a second mortgage can be. Or apply online with Abby to get your quote started and to get pre-qualified in just 15 minutes.