Home >> second mortgage

 [When should you get a second mortgage? ]

Second mortgages are loans obtained for property which has been pledged as collateral earlier to an existing first mortgage. In these cases, the second mortgage is of a lesser precedence as compared to the first mortgage and usually has a shorter loan term and higher interest rates. In certain situations, these secondary loans may require a large sum of repayment to be paid at the end of the loan term, sort of like a balloon payment. 

Most people get a second loan on their property because they are looking into making huge expenses; sending their children off to college, renovating their home or simply for personal expenditures. These loans also provide flexibility to the borrowers as funds can be withdrawn with an ATM card and checking facilities are also provided.

 What are the factors when considering a second mortgage?

First of all, with higher interest rates, the borrower has to ensure that he or she is comfortable with the effect of the extra repayment amounts on their personal costs. There are also some mortgages that require borrowers to pay only interest in the initial periods ending up with a large lump-sum payment of capital at the end of the term.

Another factor for consideration is the different variations in second mortgage packages in the market. It may not be surprising to find lenders proposing varying versions of interest rates, loan and also repayment structures. Therefore, it is up to the lender to consider all available options and engage one which best fits personal need.