Second
mortgage is type of secondary mortgage where an original one is still in
effect. In case of default, the original mortgage receives all proceeds from
liquidation of the property until and unless it is paid off completely. However
second mortgage receives repayments only when the first mortgage is paid off,
as the interest rates charged on the second mortgage tends to be higher as it
is riskier for lenders.
Second
mortgage can be prearranged as a fixed amount is to be paid in a specific
period of time known as home equity term. It can also be structured like a
credit card allowing the borrower the option of making monthly payments with
less interest charged. Considering the second
mortgage qualification it is to be brought into notice that the credit
scores should be high, a strong employment history, low debt to income ratio,
and significant equity on the first mortgage.
The
best
second mortgage rates provided by the lender can be in the form of fixed
and variable rates. The interest rates charged on the fixed rate loans remains
the same throughout the lifespan of the loan where as the variable or
adjustable rate mortgage are loans where the interest are revised periodically.
They are usually for shorter period of time with periodic rates resets
properties.
A
number of factors are kept into consideration when opting for variable rates
mortgage option as the change of the interest rates, their frequency and the
amount that is going to raise, basis of the rates change, etc. Refinancing second mortgage only tends
to be riskier for lenders as the market for the second mortgage lender is much
smaller than the first mortgage offering fewer options. But if the credit score
is good along with stable income payments being consistent then refinancing options
for second mortgage are open.
Refinancing
your mortgage not only saves money but also saves the pressure caused by the
undue rise in the rates of interest. However a few things are to be kept into
consideration when opting for refinancing
your mortgage with bad credit. One should not expect low rates of
interest as rates may rise any time by the bank, there is a need for equity in
the property, consideration should be given to government insured loans,
seeking an FHA streamline finance, and lastly making the application pristine
and attractive to draw the lenders attention.
