If you are planning on taking out a second mortgage on your home there are a number of things you need to consider before applying. Careful financial planning when it comes to your mortgage and your budget will make your life easier down the road. Here is how to go about it.
If you have settled on a 2nd mortgage instead of a home equity line of credit, the process you will go through to get this mortgage will be very similar to when you first purchased your home. You need to research 2nd mortgage lenders and shop for the right loan for your situation. Taking out this second mortgage is going to cost you money; you will most likely have to pay an application fee, various lender fees, and closing costs.
Learn The Costs Before Applying
Because taking out a 2nd mortgage is a large out-of-pocket expense, you need to research all of the costs. When shopping for a 2nd mortgage pay close attention to all of these fees. Home equity lines of credit have the disadvantage of variable interest rates; since you are applying for a 2nd mortgage and not a line of credit make sure the loan offering you consider has a fixed interest rate for the entire duration of the loan. Make sure the lender is disclosing all fees for the 2nd mortgage you are applying. If you are working with a lender that is delaying providing this information you may be dealing with a dirty mortgage lender.
Know Your Budget Before Applying
Even though you own the equity in your home, a 2nd mortgage is a loan you will have to repay. The 2nd mortgage you take out is secured by your home just like your first mortgage. If you default on either loan the mortgage lender will foreclose and take your home.