A second mortgage may become a necessity in your life if you have bills that will otherwise go unpaid or if you would like to add on to your home in order to increase its overall value. Although a second mortgage is risky for a lender, since there is already one claim against the home if you fail to make your payments, it is fairly easy to get a second mortgage based on the equity you have built up in your property. Below are the most important steps you need to take to obtain a second mortgage.
- Look before you leap. The first step is to make sure that you can afford additional monthly payments. If you are currently behind on bills, a second mortgage may be a great option if your second mortgage payment will be less than the payment for your current obligations. On the other hand, if the loan will be equal to or greater than your current monthly bills, then you may want to come up with a plan B. If you cannot make those payments, you will likely not be able to make your second mortgage payment either.
- Find rates. Next, you will want to find a lender who will give you a second mortgage. Since second mortgages are riskier, you may have a difficult time obtaining one if you don't have any equity in your home. If you do have a reasonable amount of equity built up, start your search with lenders who advertise a home equity loan option. These lenders may be eager to set you up with a new mortgage.
- Compare lenders. At this time, you can compare lenders and find out who may be able to offer you the best rate. You can do this be either filling out pre-qualifying applications online or going to each lender's place of business and speaking to a representative. If you plan to use your second mortgage to build onto your home and then quickly repay the new loan, finding an acceptable rate may not be as important to you. If you do plan on carrying the loan for some time, finding the best rate will help you save money in the long run.
- Fill out an application. Once you know who can supply you with the best rate, you can then move onto applying for the loan and finalizing the transaction. As long as you have taken all the necessary steps before you fill out the application, it is likely that you will be approved if the representative has given you the go-ahead based on your pre-qualification forms.
- Collect your funds. All that is left is to receive your funds, use the money towards your needs, and begin making your monthly payments.
Getting a second mortgage is much like getting an original mortgage, although it may present more challenges if you have no equity in your home and have late payment blemishes against your first mortgage. If you find that you cannot get a second mortgage, but are still overwhelmed by your financial situation, you may be better off trying to refinance your first mortgage to help reduce your overall monthly obligations.