A second mortgage is a good way to borrow money for a variety of purposes. You can use it to pay for a big ticket item such as a new roof, or you can use it to finance a major renovation project. But if you’re planning to apply for one, it’s important to know what you’re getting into.
While you may have a hard time qualifying for a traditional mortgage, you can find lenders that are willing to give you a second mortgage, as long as you meet some requirements. Typical loan-to-value (LTV) ratio limits, for example, are 85%, and the minimum credit score you’ll need is 620. However, the minimum amount you can borrow will depend on the lender.
Another option is a home equity line of credit, or HELOC. This type of loan lets you draw on the equity in your home for any purpose, as long as you repay it in full before the due date. For many people, this option provides financial flexibility. They can borrow the amount they need for a big ticket expense and then pay it back over a specified period of time, such as a year. The rates on a HELOC are generally fixed, and the interest payments are often tax deductible.
If you’re in the market for a second mortgage, you’ll need to consider whether you’ll need to make a down payment. Many lenders will require you to make a cash deposit, which could be as low as $500. Some lenders will allow you to make a down payment of 10%. Other lenders will let you borrow as much as 100% of the value of your home.
In order to get the best rate, you should consider all of your options. You may be able to find a better rate at a local bank, or you might get a better deal from a credit union. When searching for a second mortgage, you should look for local companies. It can be helpful to ask around and see what lenders your friends and relatives recommend.
You might also want to look into refinancing your mortgage with the FHA. This option allows you to replace your existing mortgage with a larger loan, and gives you more flexibility. Refinancing your first mortgage will lower your monthly payment, and you can pocket any additional money you have left over.
If you have a bad credit score, you can still qualify for a second mortgage, but it might cost you a lot of money. There are some companies that specialize in providing personal loans for people with bad credit, and you might be required to put down a small cash deposit as well. Unless you have a lot of savings, you’ll probably need to make a down payment of somewhere between $500 and $1,000. And be careful: if you don’t make the payments on your second mortgage, your lender may take your house as collateral.
A second mortgage is a worthwhile option for many people, and you should make sure to do your homework before you sign on the dotted line. Don’t rush into anything, and keep in mind that you may have to take the time to raise your credit score if you plan on applying for a big loan.