A Second Mortgage on your Home

By: Lee Van

A second mortgage is when you take another loan after the initial one that was loaned to purchase the home. The second loan has a higher interest rate than the first one as the risk for the lender to lose his money becomes higher. The loans are secured against the home and should you at any time find yourself in financial difficulty and not be able to pay off the loan in full the lender has the legal right to sell your home to regain his money.

A second loan should not be considered lightly for the reasons discussed above, but if you have decided that you are willing to place your home on the line and want to borrow this loan then you should do yourself a favor and first shop around banks and money lenders for the current interest rates. You need to make sure that you get the lowest interest rates in town. Every saving no matter how small helps in the end.

The first loan will get priority, so this would be paid off first then the money that remained, if there was any, would cover the cost of the second loan. If the sale of the house did not produce enough money to pay off the second loan in full the lender of that loan would be the loser. This is why they impose a larger rate of interest to cover themselves against loss.

The qualifications for securing a loan are much the same as for the first mortgage. You need to have a good credit history and be able to give a statement of your income and expenditure for the month to prove that you can afford this loan.

This loan is very handy to pay for the education of a child who is preparing to start college. The expenses are astronomical and very few parents can cope with this venture without the help of a loan. Usually you are entitled to loan quite a large amount of money on a second mortgage so this will be of great help to get the prospective student started. By the time your child graduates you will be well on your way to finish paying off the loan.

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