Mortgage second » Home Equity Loan

The Facts About Second Mortgages

admin — Sun, 03 Jan 2010 03:21:05 +0000

Your home: It’s probably your biggest asset. Having a home to back you up when you need a loan is one of the greatest advantages of home ownership. In recent years, there has been a major increase in the amount of people looking to use their homes as a way to get access to extra money when they need it most. One of the best ways to do this is through a second mortgage.

A second mortgage is exactly what it says it is – a loan made in addition to your first mortgage, and it’s based on the amount of equity you have built into your home. Many people use them to fund home renovations, to pay off credit cards, or to put a child through college. Since you’ve already been through the process once, the underwriting required to get a second mortgage is much simpler than it was the first time around, and the cost of the transactions involved will be significantly lower. This usually makes up for the fact that interest rates on the second mortgage are a bit higher than they were on the first one.

On a second mortgage, you will borrow a fixed sum of money against your home equity, and pay it back over a specified amount of time. The amount you borrow will be combined with the amount you still owe on your first mortgage.

It all sounds pretty simple. There are just a few things to keep in mind. First of all, don’t take out a second mortgage on your home unless you’ve built up a fair amount of equity in the property already- that is, made payments on the original mortgage balance for a good amount of time. You may still be able to get a second mortgage if you don’t have much equity, but your rates will be so much higher, and the amount you can borrow so much lower, that it will essentially be a waste of your time and money. This is one of those things that is worth waiting for.

Also, look into the other options of borrowing against the equity of your home, including a home equity loan and a home equity line of credit. All of these options allow you to borrow against your equity, but there are slight variations among them that mean one of the three may be the best option for you. It will depend, for the most part, on your particular financial standing, the amount of money you need to borrow, and the amount of home equity you currently have.

By: Joseph Kenny

Fixed Rate Home Equity Loan Versus Adjustable HELOC: Comparing 2nd Mortgage Loans

admin — Sat, 19 Dec 2009 18:07:23 +0000

Many people think of a second mortgage as a fixed interest, lump sum loan. However, that is only one form of a second mortgage. A second mortgage is actually ANY secondary lien on your home–secured loan with your home pledged as collateral. Second mortgages are typically categorized as fixed mortgage rate home equity installment loans (HELs), also known as home equity loans, and home equity lines of credit (HELOCs) which are adjustable rate mortgages.

The Federal Reserve states that the home equity line of credit annual percentage rate (APR) is a variable rate loan based solely on a publicly available index (such as the prime rate published in the Wall Street Journal or a U.S. Treasury bill rate). The APR does not include points or other finance charges. The monthly payment amount will adjust as your loan balance and interest rate changes. Loan terms can be anywhere from 15 to 30 years.

HELOCs have a draw period, typically occurring in the first 10-15 years, with the remaining term on the loan referred to as the repayment period. During the draw period, you can draw out money on a revolving basis similar to a credit card without applying for a new loan, as long as the amount does not exceed the total amount of the original HELOC. During the repayment period you may be allowed to renew the credit line. If your plan does not allow renewals, you will not be able to borrow additional money once the draw period ends. Interest is paid only on the amount of equity you use.

A Home Equity Installment Loan (HEL) is a fixed mortgage rate loan, which means the annual percentage rate (APR) and monthly payment will stay the same for the life of your loan. The APR for a HEL takes into account the interest rate charged plus points and other finance charges. Loan terms can be anywhere from 5 to 30 years, but are typically 15 to 20 years. Unlike a HELOC, you get a lump sum for which you immediately start paying principal and interest. If you decide later that you need additional funds, mortgage refinancing or getting an additional loan with additional closing costs are your only options.

Which type of loan you choose depends on your financial needs. A HELOC may be best if you have a recurring need for money (e.g., home improvements or a home repair project that has anticipated additional expenses). The security of a fixed-rate 2nd mortgage will probably provide much-needed relief for a large one-time expense (e.g., debt consolidation).

By: Maria Ny

What Is A Second Mortgage?

admin — Fri, 04 Dec 2009 12:46:42 +0000

A second mortgage is a loan that is secured by the equity in your home. When you obtain a second mortgage loan the lender will place a lien on your house. This lien will be recorded in 2nd position after your primary or 1st mortgage lender’s lien, hence the term second mortgage.

A second mortgage is also sometimes referred to as a home equity loan. There is no difference between a home equity loan and a second mortgage. These are just two different terms for the same subject.

A second mortgage can either be a fixed-rate loan or an adjustable-rate credit line. Interest rates and loan program terms will vary from lender to lender so it is important to shop around and compare before committing to any one offer.

Loan proceeds from a second mortgage loan can be used for just about anything. Many consumers take out 2nd mortgage loans to consolidate debt, do home improvements or pay for their kids college education. Whatever you decide to do with your loan proceeds it is important to remember that if you default on your payment you can lose your home so you will want to make sure that you are taking the loan out for a worthwhile purpose.

Another plus of a second mortgage loan is that the interest you pay back on the loan may be tax deductible. Consult your tax advisor regarding your personal situation but in most cases the interest is 100% fully deductible as long as the combined loan to value of your 1st and 2nd mortgage do not exceed the value of your home.

For more information on second mortgage loans, or to compare rates and programs of second mortgage loan lenders visit http://www.equityloansource.com

By: Levetta Rivera

Second Mortgage Fee Restrictions in Maryland

admin — Thu, 03 Dec 2009 18:21:34 +0000

The past five years has witnessed the institutionalization of sub-prime lending, with the locus of sub-prime loans shifting from small, independent lenders to large mortgage subsidiaries of banks (particularly national banks). Investment banks and their affiliates increasingly are not only underwriting sub-prime securitizations but originating loans in sub-prime loan pools as well.

Because sub-prime loans are generally more expensive than traditional prime loans, advocacy organizations nationwide are urging tighter restrictions on these types of loans. However, sub-prime loans are intended for borrowers who pose a greater risk to lenders, typically because of the lack of credit or previous credit problems. And, without the sub-prime segment, an increasing number of borrowers wouldn’t be able to secure purchase loans or cash out on their home equity with a mortgage refinance or home equity loan (second mortgage).

Like California, the state of Maryland is imposing excessively strict predatory lending laws including the imposition of a max 7.99% annual percentage rate (APR) limit which is lower than that of other states. Maryland also has a finder’s fee law that limits the fee a mortgage broker’s finder’s fee to 8% of the total loan amount brokered, and limits the fee on subsequent loans on the same property in a twenty-four month period to 8% of the amount by which the subsequent loan exceeds the initial loan.

Now, Maryland’s Montgomery County is in the news for its new predatory lending law that has at least 50 national and local lenders making a mass exodus out of that county due to the law’s vague language and exorbitant fines. Weighing the unknowns of the law, many financial companies have preferred to exit the market, meaning it could become increasingly difficult for consumers to find a lender for mortgage loans. Financial officials have said the law could make it difficult to find fixed-rate loans for many of the median-priced to more expensive homes in the county, since many of the lenders that bought such loans on the secondary market decided to stop doing business in the county. “The fixed rate conduit market has basically dried up because of this law,” said Kathleen M. Murphy, president of the Maryland Bankers Association.

This new Montgomery County law is on hold until November, which is a welcome relief to lenders and mortgage brokers as well as consumers seeking purchase loans, mortgage refinancing and second mortgages.

By: Maria Ny

Why Second Mortgage Rates Are Higher for Home Equity Loans than 1st Mortgages

admin — Sun, 22 Nov 2009 23:30:45 +0000

Home equity is the difference between what you owe on your mortgage and the fair market value of your home. Cashing out on home equity for debt consolidation is continuing to gain popularity. The typical way to cash out on home equity is to either refinance an existing first mortgage or take out a second mortgage.

Many people wonder why the interest rates for second mortgages are higher than those for first mortgages. The reason for this is a second mortgage is a subordinate loan secured by the same property as the first mortgage. Thus, if the mortgage isn’t paid and there is a foreclosure on the property, the first lender is paid off before the second lender. As a result, second mortgages entail more risk for the lender. To offset the risk, lenders charge higher interest rates for second mortgages than for first mortgages.

According to BankRate, second mortgage and home equity lines of credit have become increasingly common since the mid-1980s as property values have soared and homeowners have learned about managing personal debt. Among the reasons for this surge in popularity: attractive interest rates and tax deductibility. Many times, home owners can deduct up to 100% of the interest they pay on mortgage loans off their taxes.

If you need to draw equity from your home and the rates on your first home are lower than the current rates, it will probably be cheaper to get a second mortgage even though interest rates are higher. If you have a specific purpose for the loan that requires a specific amount of money, a home equity loan, also known as a home equity installment loan (HEIL), may be your best bet. Home equity lines of credit (HELOCs) are useful for those who have an occasional or on-going need for money because interest is only charged on the amount of equity used.

Compare the annual percentage rate (APR), the cost of credit on a yearly basis, when shopping for a second mortgage. Unlike home equity loans that include the total credit costs for the loan, the advertised APR for home equity credit lines is based on interest alone. For a true comparison of credit costs, compare other charges, such as points and closing costs, which will add to the cost of your loan.

By: Maria Ny

Second Mortgage Loans Vs Home Equity Loans

admin — Wed, 18 Nov 2009 11:02:04 +0000

It’s not surprising that some homeowners confuse the terms “second mortgage” and “home equity loan.” After all, a second mortgage is a type of home equity loan. But more often than not, home equity loan is used to describe a home equity line of credit, or HELOC. If you want to take advantage of the equity that you have built up in your home, you will need to decide if a HELOC or a true second mortgage is best for you.

Make a list of what you want to know, what you need to know, and what you already know about this subject.

Before agreeing which might be better for your purposes, let’s look at some of the basics of each. A second mortgage pays out a permanent sum of money to be reclaimed on a set schedule, like your opening mortgage. Different refinancing, the second mortgage does not supplant the first mortgage. Moment mortgages are typically 15- to 30-year loans with a permanent ratio of profit. Like the opening loan, the ratio of profit and points (if any) will be based on your credit chronicle, the estimate of the home, and the flow profit ratio. While the profit ratio on a second mortgage may be a little advanced, the fees are normally poorer. Should You Pay Points?

A HELOC, however, is parallel to a credit license, and it may even involve a credit license to make purchases. Like credit licenses, profit is emotional, and the quantity you can sponge is based on your creditworthiness.

To shape the perimeter of your HELOC, lenders will look at the appraised appraise of your home and begin their calculations at 75 percent of that appraise. They then withhold the outstanding tally allocated on the mortgage. If your home was appraised at $200,000, the lender would typically look at a greatest of $150,000 or 75 percent. If you had salaried off $100,000 of your $180,000 loan, the lender would then withhold the lasting $80,000, which would mean you would have a greatest of $70,000 offered on a HELOC if you had a very good credit chronicle. Learn how to Evaluate Your Creditworthiness.

As we take a closer look, keep in mind all of the useful and important information that we have learned so far.

Your flow fiscal desires will help shape which type of loan is right for you. If you need money for a one-time price, such as edifice a new deck or paying for a wedding, you would doubtless opt for the permanent-ratio second mortgage.

But if you forecast a habitual need for further money, such as teaching payments, you may favor a HELOC. A line of credit allows you to sponge when you need the money and, if you pay back the quantities you sponge rapidly, you can store money over a second mortgage. You also need to respect your expenses routine. If having another credit license in your wallet would tempt you to waste more often, then you are not a good contender for a HELOC.

Once you make an opening determination about which loan might be right for you, you will need to argue the niceties with your lender. While second mortgages typically operation in the same mode as your opening mortgage, ranks of credit are different. Because they aspect monthly payments, you will need to analysis the keen typeset charily.

There is no famine of lenders and offers for loans and ranks of credit. Deem your desires, then store around for a lender you can faith.

If you have found our database of information on this subject useful, read some of our other topics as well.

By: Amy Shan