Second Home Loan

 

 

A second home loan helps the borrower to refinance his existing debt and attain greater financial security. Many homeowners wish to take a second home loan on their property. In such a case, the home is used as collateral. In case the house is sold or the borrower defaults and the lender sells it, the second loan is repaid only after paying off the due amount on the first home loan.[br] 

When to Opt for a Second Home Loan?

A second home loan can be either a home equity loan against the equity on one’s house or a second loan taken to cover the difference of the first loan and the down payment.

Second home loans can be opted for in the following situations:

• When a person has accumulated a large amount of debt through auto loans, balances on high interest credit cards and other bills and needs to pay them off.

• A person wishes to invest some funds in his business. But the rate of return on investment should be higher than the cost of the second home loan.

• If a person wishes to avoid private mortgage insurance. A second home loan should be resorted to only if the second mortgage is up to 20% of the home purchase price.

• One needs cash for several purposes.

 

Most lenders offer a second loan amount that takes the total loan to a value ratio 85% of the home’s appraised value. Another thing to remember is that the interest rate on the second home loan is higher than that for the first loan.  

How to get a Second Home Loan[br]

The process of getting a second home loan is similar to that for getting a first mortgage. One needs to approach the various lenders and take quotes from them. A comparison of the various quotes will help an applicant decide which lender to choose.

 

Second home loans can be fixed rate loans or adjustable rate home loans. The interest rates on second mortgages are dependent on an applicant’s credit rating, total loan to value ratio and the current market trends. Some lending agencies offer zero or no equity loans, which enable a buyer to borrow up to 125% of their home’s value. However, the interest rates on such loans are very high.