What is a Second Mortgage?
A second mortgage is often called a home equity loan or a home equity line of credit. Essentially, the borrower is provided with a sum of money or a line of credit secured against the home. The reason that it is described as a second mortgage is in reference to its position priority wise relative to the original home loan.
One of the main reasons that many people view a home as an investment is because most homeowners will generate equity in their homes by living there and making their mortgage payments on time. That equity can then be utilized at a later date for any number of purposes.
At California Mortgage Advisors Inc., we believe in helping homeowners leverage the equity in their homes for maximum financial flexibility and security. Through the use of a second mortgage, our customers can transform their home equity into a cash payout or line of credit. The cash can be used for any purpose such as cash reserves, home improvements, debt consolidation, investments or even pay for college tuition, the options are endless. A second mortgage can even be used as a purchase loan along with a first mortgage.
California Mortgage Advisors Inc. has been helping clients with their financing needs for over 20 years. A CMA Mortgage Advisors can assist you in selecting the right second mortgage or home equity line of credit. Our Mortgage Advisors are available at (800) 927-6560 to answer your questions or click here to apply online.
Types of Second Mortgage
Second mortgages fall into the category of a home equity loan or a home equity line of credit. With a home equity loan, the borrower receives a lump sum of money and is then responsible for repaying it over a predetermined amount of time, just like a traditional mortgage. With a home equity line of credit, the borrower opens a line of credit secured against the value of their home. They then can draw against that line of credit just like they would a credit card. After a set period, the credit line will expire, and the borrower will begin repayment. A CMA Mortgage Advisor can help borrowers determine which type of second mortgage that best fits their needs.
A second mortgage can be used for anything. This makes a second mortgage an ideal financial emergency fund.
Advantages of a Second Mortgage
The primary advantage of a second mortgage is the flexibility that it provides when compared to other traditional loan sources. With a second mortgage, the loan is secured against the established equity of the home. The lender will establish the value of the home, verify the current balance of the primary mortgage and generate a loan estimate based on the difference of the two. Once the loan has been funded, borrowers are free to spend the money in whatever way they deem best.
Disadvantages of a Second Mortgage
As with any mortgage, a second mortgage is secured using the home as collateral. The borrower is at risk of losing their home in the event that they default on the loan. Additionally, lenders traditionally charge a higher interest rate for a second mortgage when compared to first mortgage. Finally, the borrower is trading home equity for access to cash. The good news is that if they continue to make payments as normal, this equity will naturally replenish itself.
The amount that a borrower can receive as part of a second mortgage is dependent on several factors. The most significant factor, however, is the current value of the home and the balance of the first mortgage. The difference between the two usually affects the rate and terms of the second mortgage. Loans fees and interest rates are also dependent on several factors and will vary greatly from lender-to-lender. At CMA, our Mortgage Advisors work with every customer on an individual basis to ensure they are receiving the best terms possible based on their personal financial history.
At California Mortgage Advisors Inc., we genuinely believe that we offer our customers the best mortgages in the industry. We have offered a variety of loans since 1993, which means our Mortgage Advisors have successfully matched tens of thousands of borrowers with loans tailored to meet their needs and unique financial situations. If you have any questions, please call (800) 927-6560 to speak with one of our Mortgage Advisors or click here to apply online.