Things to Remember when Considering a Second Mortgage
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Posted On :
Feb-06-2012
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Article Word Count :
510
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A second mortgage can be just the answer you’re looking for in times of emergency or when you need a large amount of money at once, such as when you’re building an addition onto your home. However, second mortgages also come with their own risks. The biggest one of course, is that you’re putting your home on the line should you not be able to afford to pay back the loan in the future.
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A second mortgage can be just the answer you’re looking for in times of emergency or when you need a large amount of money at once, such as when you’re building an addition onto your home. However, second mortgages also come with their own risks. The biggest one of course, is that you’re putting your home on the line should you not be able to afford to pay back the loan in the future. To make sure that you don’t get into a situation you can’t get out of, here are a few tips to keep in mind when you’re considering whether or not a 2nd mortgage is for you.
Just like first mortgages, second mortgages can come with some pretty hefty prepayment fees; and just like with a first mortgage, you want to avoid these as much as possible. Don’t get a second mortgage that locks you in or that has too high a fee. Again, your home is in jeopardy should you not be able to pay it off. And your lender shouldn’t penalize you too much for just wanting to honour your debt.
Another way to keep your costs down with a 2nd mortgage is by making sure that yours doesn’t include a voluntary insurance policy in the contract – if you don’t need it. Check with your home insurance broker first and see if you’re already covered for what the voluntary insurance will protect. The chances are good that you already are, and that you don’t need to pay for this insurance yet.
With second mortgages it’s especially important that you beware of any mortgage packages that seem too good to be true. Sometimes lenders advertise great second mortgage packages, with an extremely low monthly payment, and the homeowner finds out later that there’s a huge balloon payment due at the end of it. While this is sometimes a good option for homeowners, it’s also often one that can lead to even more financial trouble when that large balloon amount becomes due. Make sure you know exactly how your payments will be set up, if they’ll increase or decrease at any time (other than when you’re using an ARP,) and make sure that you can afford them.
Above all, use a mortgage broker for any mortgage that you’re applying for, but especially when you’re applying for a 2nd mortgage. These can be more difficult deals to sort through and most importantly, you’ll need someone that can shop around for you and see which lenders are offering what packages.
Too often homeowners think that they need to obtain their second mortgage from the same lender that holds their primary mortgage, but that’s often not the case. At times the primary mortgage lender may offer a discount for holding both mortgages, but it can also save you a lot of money to go to a different lender. A mortgage broker will be able to sort that, and everything else related to your second mortgage, out for you.
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Article Source :
http://www.articleseen.com/Article_Things to Remember when Considering a Second Mortgage_144844.aspx
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Author Resource :
Bryan J is the author of this article. For more information about what is second mortgage or anything else second mortgage please visit canadianmortgagesinc.ca.
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Keywords :
what is second mortgage, second mortgage,
Category :
Finance
:
Mortgage
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