Getting a Second Mortgage
Written by Lee Wyatt (last updated February 25, 2022)
Getting a second mortgage is a popular choice among many homeowners for dealing with financial troubles. As the reasoning goes, if you have a little equity built up in your home, and you face mounting bills, why not take advantage of the one to fix the other. While this may make sense to many people, it doesn't mean that it is the best possible solution. Getting a second mortgage is a huge step that needs to be carefully thought through before it is undertaken.
Here are a few simple guidelines that are designed to help guide you through the process of getting a second mortgage. As you read through these guidelines, write down your answers on a separate piece of paper. By the time you have finished, you will know not only whether you have found the best possible second mortgage, but whether you even need one at all.
- Do you really need it? As with any potential financial obligation, you need to ask yourself if you really need this. Keep in mind that the answer should never be: "Since I want it, I need it." Obtaining a second mortgage will directly affect your credit rating, and therefore affect your future purchasing power, and increasingly your career, anything that can affect this should be carefully considered.
- Will you be able to budget the payments? While the purpose of a second mortgage is to provide you with more money, remember that you will need to payback every cent that you receive, and then some. Figure out ahead of time how much you can afford to pay back each and every month (including interest) till it is completely paid off. This will entail you creating a budget, and sticking to it. It does no good to go into debt, to try to get out of debt.
- Have you shopped around? As always when making a purchase, have you shopped around? This would entail that you have actually called around, visited with mortgage brokers, and compared the various products offered? No two mortgages will be the same, and not all of them will be exactly what you want. Get as much information as possible before making your final decision.
- Do you know the requirements for your second mortgage? Do you fully understand all the terms and conditions of your second mortgage? Many times you will be required to also get a new insurance policy to cover your second mortgage, are you going to be required to do this? If so, are you going to be able to afford it? Is there an early payment penalty for your second mortgage? Have you had all your questions fully explained by the mortgage broker?
- Have you filled out the application? After calling around, and making your decision, all that is left to do is fill out the application. Make sure that you fill out everything on the application as thoroughly as possible, since any ambiguous answers can potentially hold up, or even cost you the loan.
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