Second mortgages at competitive rates
More often than not, living life to the hilt comes at a cost, and this is where a 2nd mortgage comes to your aid. A second mortgage, sometimes referred to as HELOC (home equity lines of credit) is a supplementary loan usually offered against your property as collateral.
You usually apply for a second mortgage to meet a major expense like a hospital bill, college education, and credit card debt consolidation or towards boosting your home’s equity.
What can you do with a second mortgage?
You can put a 2nd mortgage to many uses.
A second mortgage can help pay for unforeseen medical expenses, children’s education, home renovation, wedding anniversary, and so on. Additionally, you can invest the funds in real estate or a start-up or pay for a luxury cruise.
No matter what you choose to do with your second loan, make sure you use it prudently.
Keep in mind that you’ll have to reimburse it in due course at a high rate of interest along with the EMIs for the 1st mortgage.
Benefits of taking a second mortgage
- Access to a Substantial Amount – Second mortgages offer you access to a substantial amount of funds. Since the loaned amount is secured against a fixed asset like your home, it is generally more than the sum you could get without mortgaging your house.
- Tax Relief – If you spend the sum to improve the resale value of your home (renovation) or for buying investible property, the interest on the second mortgage will not attract tax.
- Lower Rates of Interest than Unsecured Loans – As you pledge your home to secure a second mortgage, the interest rate is lower compared to the interest on personal loans or credit cards.
Types of second mortgage
A second mortgage can take the following distinct forms.
- Home equity line of credit (HELOC) – Taking out a HELOC is very much like applying for a credit card. A home equity line of credit, like a credit card, can be used to finance purchases, but the interest rate could vary from month to month. Simply put, a HELOC is a mortgage with a fluctuating rate of interest that comes in handy for financing small expenses.
- Home equity mortgage offered as a lump sum – A home equity loan is a regular second mortgage that offers you a large sum in a single payment. You pledge your house as collateral to secure this type of loan.
Private lenders for real estate.
A second mortgage enables you to take out a loan against the equity of your home that might already be hypothecated. However, you’d need to bear in mind that a second mortgage normally comes at a steep interest rate. The rate of interest tends to be higher than the rate you’re paying for your first loan.
Second mortgage providers charge a high rate of interest because they’re less likely to be reimbursed compared to the principal lender if the homeowner defaults. It is to recompense for this extra risk that lenders of second mortgages levy a high interest rate. You might qualify for a home equity line of credit with a competitive interest rate if your credit score is good and you’ve over 20% equity in your home.
Alternatively, if your home equity is low and credit score is less than 25% then you’ll need to contact trust companies and private lenders for real estate for a second mortgage. A private lender for real estate or a mortgage broker will review your earnings, credit score, and equity before deciding in your favour.
Contact Banyan Venture Partners
We are a leading mortgage broker specialising in second mortgage at competitive rates. We can assist you in securing an attractive loan from private lenders for real estate. Contact us today for a free consultation.