Introduction
A second loan can provide you with the cash that you need whenever you need it. However, you’ll need to have equity within your home that you can borrow against. You also need to understand that second mortgage rates are usually higher than the first. This is because a second mortgage actually taps into your home’s equity and turns that into usable cash. Once you have taken out this second loan, you’ll need to make monthly payments in order to pay it back.
Step 1
Find some mortgage lenders to talk to. Your initial mortgage lender may be willing to give you a second loan. In this case, it would be easier to work with him than it is working with a new lender. This is because he already knows you and your property.
Step 2
You’ll need to have your home appraised because your second loan will be based upon your home’s value. If you owe more than your home is worth already, then you will not be able to get a second loan. This is because you’re borrowing against your home’s value and thus there needs to be some value there.
Step 3
Compare the second mortgage rates, which will be higher than a first mortgage because your second loan is considered to be riskier. If you default on your first mortgage, the bank will foreclose on your home so that they can be paid what they’re owed. If you default on your second mortgage, your home can still be foreclosed on but the first mortgage note will be paid off first.
Step 4
Choose a second loan and apply for it. Make sure that you’re being offered a good rate and that you apply for any loans that are of interest to you within a 2 day period. This is important because multiple inquiries on your credit report lowers your credit score but if there are several inquiries within 1 or 2 days the inquiries will be lumped together so that you can shop for the best second loan. Keep these things in mind whenever you’re filling out the paperwork and paying any associated fees.
Step 5
Now you’ll receive your payment. Sometimes this will be in a lump sum in the form of a check that you’ll receive when you sign the loan’s paperwork. A second loan may be structured in the form of a home equity line of credit though. This means that you can access the money as needed via either a credit or check card. Always remember that as you take this money out to use it you’re actually borrowing against your home. So, if you don’t pay back your debt, your home can be foreclosed upon, which is why you need to use this money wisely.
Tips
Take your time whenever you're looking for a second loan. While you'll want to make all applications within a 2 day period in order not to lower your credit score too much, you can take as much time as you need to carefully read through the loan's terms. This is important because you'll want to make sure you know what you're signing before you sign anything.
Sources and Citations
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