Second mortgages are also gaining popularity as "piggy back loans"--a home financing option in which property is purchased using mortgages from two or more lenders with the risk being equally spread among them.
2nd Mortgage Advantages:
Whether you have good credit or bad credit, second mortgages allow for you to cash out on larger amounts of money at relatively low fixed mortgage interest rates, as compared with credit card rates and variable interest rate home equity lines of credit (HELOCs). Second mortgage loan provides the borrowers with extra money, which is given as a lump sum amount and not as advances. This, too, places an additional mortgage on the property, but it checks over spending.
Second mortgage loans may be 100% tax deductible. Another advantage of second mortgage is that they usually offer fixed interest rates and fixed payment amounts.
Flexible guidelines allow you to use the money for any purpose, including debt consolidation for lower payments and significant monthly savings.
A second mortgage leaves the rates and terms of your first mortgage unchanged, so instead of having to refinance your existing mortgage, just add a second.
2nd mortgages normally fund quickly with little or no closing costs. Example: Nationwide Mortgage offers 125% LTV and other second mortgages, including interest only loans that fund faster, often with no appraisal fees.
2nd Mortgage Disadvantages:
If you fall behind on the payments your mortgage lenders can foreclose, which means you could lose your house.
Second mortgages carry higher interest rates than first mortgages. Nationwide loan officer, Brendon Daly, states that "due to the risk factor with these subordinate liens, most lenders will charge higher fees and higher interest."
The interest rate offered by a second mortgage company is higher than the first one. This is so because the second mortgage company is taking more risk. In case the house is sold to recover the money, the first consideration goes to the first mortgage company. The second mortgage company will only get the amount left over. According to "Mortgage for Beginners" found through ask.com, some second mortgages carry high upfront fees, closing costs, or other annual fees, as well as prepayment penalties and balloon payments.
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valuable news & reviews. Due to the increase in the cost of almost all amenities, it has become very difficult to purchase anything by making a full payment. The purchase of a home is one of the major investments in an average
persons life, but it is difficult to do so by making a down payment of the full amount. Therefore, majority of people opt to take a mortgage to buy a new house. Homeowners who need money for their other financial obligations, too, choose mortgage, by putting their property as collateral in exchange for cash. However, at times, borrowers are faced with tight financial situations and they are not able to make the usual monthly payments towards their mortgage. These borrowers find second mortgage a viable option.
Many borrowers remain skeptical while getting a second mortgage, as the risk on the property increases. If the borrowers are not able to make the payments, the house may be sold to recover the loan amount. However, borrowers can also choose to put their homes at risk. They may opt to borrow from credit lines that do not require the property to be signed as the collateral.