Second Mortgage– What You Need To Know

Getting a second mortgage provides you with lump sum money at once, which you need to repay at regular intervals, over a certain period of time. This payback term is decided as agreed upon by each of the parties involved viz. you and the lender. The rate of interest for the entire life of loan is also set at a fixed value. On the contrary, if you default on the loan, the lender possesses all the rights to foreclose your property and recover the finances offered. 

Here’s some more information about second mortgages: 

There are so many lenders that are very keen to offering these types of home loans. However, majority of these creditors look for the following information before considering the application for a second mortgages:

> Debt to Income Ratio

> Credit Score

> Employment History

> Equity in the First Mortgage

Let us have a brief look at the importance of each of these factors as follows:

1.    Debt to Income Ratio

This fraction specifies your ability to handle your income and expenses. It is highly recommended to have a low debt-to-income ratio, since it clearly explains how well you take care of your finances. An opposite proportion, on the other hand, tells the lender you are not a good borrower at all, thus limiting the loan options. 

2.    Credit Score

This is another important aspect that is considered by almost all the traditional lenders such as banks for assessing potential borrowers. A high credit score, typically above 600 points assures the lender of repayment of his/her money, adding extra points to your credit worthiness. As a result, the creditors negotiate on the rate of interest without giving it much thought. Conversely, borrowers with mortgage poor credit history need to be ready for carrying the burden of huge interest rates. Hence, if you want to enjoy lower interest rates, make sure that you maintain your credit scores at acceptably high levels.