A second mortgage is similar to
home equity
loans, which are fixed rate, simple
interest loans, recorded as a second lien on the property
title deed behind the existing first mortgage. The equity in your
home can be accessed without
refinancing.
Cash out from a scond mortgage can be
used for just about any purpose, such as home
improvement, or debt
consolidation. Paying off high interest debt, reduce
monthly payments, change compound interest into simple
interest, and save money from a possible tax deduction.
Looking for a high loan to value second mortgage? Some credit unions and banks are offering loans and credit lines with no equity to qualified borrowers. See 100% home equity loans.
When you compare
second mortgage rates, terms
are usually offered in 5 year increments, ranging from
5 to 20 years. Fully
amortized, fixed rate second mortgages are scheduled
to be paid off at the end of the designated term as specified in
the loan documents,
with no balloon payment due.
Second
mortgage rates can be
influenced by a number
of factors such as: credit scores, the amount of the
loan requested, debt to income ratio, your disposable income, and
the value of your home.
Second mortgage interest payments
may be tax
deductible for a primary residence, with a limitation for
the deduction set at a maximum of $100,000 or 100%
of value. Check with a tax advisor.
The full second mortgage
loan,
minus any closing costs, is paid in one lump sum at the close of the loan
process,
unless there is an agreement to pay any third parties directly.
For example, a lender may require some borrowers to pay off
certain debts in order to meet the debt to income ratio. Also, if you
have a
line of credit or home equity loan, it must be paid off
with the new loan.
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