For most people your home is the most valuable asset you own. When you have a need for a loan, you can rely on this asset of yours to take up one. The best way to do this is by taking up one of the most common types of mortgage loans called the 2nd mortgage loans.
As the name implies, a 2nd mortgage loan is just a loan in addition to your first or original home mortgage loan that you have taken up sometime ago.
Here are some quick tips on what you should know if you are considering taking up such loans:
1. How much you can quality for your second mortgage loan depends on the amount of equity you have since paid on your home.
2 The combined total amount of the original and 2nd mortgage must not exceed the value of the home.
Cost of Funds
3. Given that all the underwriting process has been completed for your original mortgage loan, the administration work here is much simpler for this loan. The interest rate on such 2nd mortgage loans is expected to be slightly higher than those of first mortgages.
4. Interest paid on the loan is on most cases usually 100% tax deductible.
5. When taking up such a loan, if this amount is over 80% of the value of your home, it requires private mortgage insurance to be arranged by the borrower.
6. The lender places a lien on your home for your 2nd mortgage loan.
For many years many people have always used their homes as collateral to obtain many different types of mortgage loans. This type of mortgage loan is predominantly structured on a long term period like 20 years. So over the years as the value of your property rose up, you do have an enormous potential to borrow a 2nd mortgage loan against this property to access the extra money that you need.
As it is, there are many advantageous for taking up such loans but on the same breath there is a need to do your homework to determine if your present financial appetite allows you this luxury. When you do take up 2nd mortgage loans do make sure that you can support the monthly payments and take note that defaulting in payments have serious consequences including losing your home.