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Second Mortgage Loan
A second mortgage loan is a subsequent loan and subordinate to the
earlier mortgage. In other words, a second mortgage loan is used as
collateral pledged for the first loan.
Length of Second Mortgage Loans
Second mortgage loans have varying lengths with which they are eventually
paid off. Some second mortgage loans may last for as long as 15 or
20 years. Other second mortgage loans only require one year for repayment.
When you’re thinking of taking on a second mortgage loan, you will
need to know what term best suits you. Discuss the repayment terms
of the second mortgage loan with your bank or lending company. For
instance, you get a second mortgage loan worth $20,000 to make some
home repairs. With this amount, you might want to take on a second
mortgage loan that will allow you to repay the entire amount in one
or two years. If you pay a second mortgage loan that has a shorter
term, the monthly payments may be too high.
Payment Calculations for Second Mortgage Loans
Before taking on second mortgage loan, be sure that you understand
a couple of things first. Know how much your monthly payments will
be for that second mortgage loan. Moreover, it is also helpful if
you also have an idea as to where those second mortgage loan payments
will cover.
Some second mortgage loans require you to make monthly payments on
both interest and principal. Other second mortgage loans only require
you to pay the interest of the borrowed amount.
The former type of second mortgage loans will allow you to significantly
shorten your payoff period since with each payment you make, you are
also chipping away at the principal. With the interest-only second
mortgage loan however you will be required to pay back the entire
amount that you borrowed as soon as the term ends. This type of second
mortgage loan is also called balloon payment loans.
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"Ninety percent of all millionaires become so through owning real estate."
- Andrew Carnegie
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Second Mortgage Loan Costs
Fees may be charged by some lending companies for the money you borrow
on second mortgage loans. The fees, referred to as “points,” are usually
a percentage of the second mortgage loan. One point on your second
mortgage loan is equivalent to one percent of the amount you borrow.
So, if you were to get a second mortgage loan of $10,000 with an eight-point
fee, then you would have to pay $800 in “points.” Second mortgage
loan companies may charge you in varying number of points so if it
might be helpful if you do a comparison first.
Second Mortgage Loan Rates
Second mortgage loans have different payments plans. Most second mortgage
loans have a fixed rate payment included in their payment plans. If
you have a fixed rate second mortgage loan, the interest rate will
be set for the whole loan term. This means that your monthly payments
for your second mortgage loan will not be affected by any outside
changes.
Some companies also offer second mortgage loans with variable rate
payments. These variable rate second mortgage loans periodically experience
rate adjustments. A variable rate second mortgage loan might be cheaper
than a fixed rate payment in the long run. But this is only provided
if the interest rates of second mortgage loans go down. If interest
rates rise, then your monthly payments for your second mortgage loan
will rise as well.
Additional Resources and Latest News:
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Mortgage rates expected to remain lowNewsdayThat's because even if mortgage rates remain near record lows, certain fees associated with getting conventional mortgages are set to rise. "Congress has already tacked 0.125 percent onto every conforming mortgage," said Dan Green, a loan officer at ...and more » |
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