Rates for second mortgages & more: What homeowners should know

by Bill and Aby Brooks, REALTORS® 11/06/2022

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For homeowners who want financing in addition to an existing loan, rates for second mortgages are high on the list of things to consider. A second mortgage allows you to borrow money against the equity you’ve built in your home.

Here is some more important information homeowners should know about this type of financing:

What is a second mortgage?

A second mortgage is a lien placed on an asset that already has an existing mortgage. For your house, the second mortgage will function like a home equity loan or home equity line of credit (HELOC).

Just like with your regular mortgage, your loan officer may take possession of your home if you default on the loan.

Second mortgages are often cheaper than cards because of their low rates. You can use your second mortgage money for virtually anything, which makes them a popular choice for handling debt consolidation, home improvements and medical expenses.

How to get a second mortgage

The first step in obtaining a second mortgage is to determine your home’s equity. It’s ideal to have at least 20% equity, so the remaining loan amount doesn’t go over 80% of the home’s total value.

It’s also a good idea to check on your credit report before applying. This gives you a chance to dispute any mistakes or resolve any issues that could affect your ability to qualify for a home equity loan or credit line.

When to apply for financing

There is no hard and fast rule for the best time to get a second mortgage. It’s important to consider every possible factor, including the current interest rate and your financial situation.

Usually, borrowers follow market trends when acquiring the second loan. Mortgage rates can vary, but tracking the trends of the market will allow you to apply and receive a second mortgage when rates are low. You also want to be aware of the various fees charged by mortgage lenders and how they factor in to the total annual percentage rate (APR).

Home equity loans through second mortgages are a great way to capitalize on your home’s equity. They can help you cover expenses unrelated to your home, either through a lump sum loan or HELOC. To find out if a second mortgage will work for you, consult a financial advisor and check with your lender for details.

Second Mortgage

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About the Author

Bill and Aby Brooks, REALTORS®

Aby’s understanding of excellent customer service stems from her extensive professional background. Prior to earning her real estate license in 2005, along with her college degree that focuses on business and engineering, Aby was the head of purchasing, inventory and quality assurance for an OEM medical and aerospace manufacturing company. Known by her clients and fellow realtors for her tenacity, honesty, integrity, and attention to detail, as a full-time realtor, she is also appreciated for her quick response to her client’s needs. Aby has been an avid horse rider and owner since the age of eight, with her husband Billas a local firefighter/EMT they are very active within the community. Bill served as a US Army Airborne Ranger in 75th Ranger Regiment, he is a combat-wounded veteran who was awarded a Purple Heart. Bill's background as facility Manager for an International metals company and as a firefighter/EMT gives him the experience, attention to detail and the desire to go above and beyond to serve his customers. The Brooks' serve on the board of a local non-profit (501c3) that gives back to the veterans, first responders and their families. The Brooks family resides on their small ranch in Manatee County. Aby& Bill excel in all types of real estate and their passion is helping people. “We genuinely like people, growing up in Sarasota and Manatee counties and now raising our own family here, it is an absolute pleasure to share our growing area with newcomers and reminisce with longtime residents. Our area has so much to offer and it is our business to help folks buy and sell their own piece of paradise.”