What is a Second Mortgage, and When Should I Use One?

If you are a homeowner and have financial difficulties, there are some options available to raise money quickly. You can request a loan; perhaps sell some items on eBay, or you can take out a second mortgage loan. This last option gives you the opportunity to have much more additional money than a loan or eBay. However, there are a few pitfalls that you should know about.

Is It the Same As a Remortgage?

One of the biggest mistakes people make with a second mortgage is to confuse it with a remortgage. They are two fully different things. While a remortgage transfers it to a different lender to get a better interest rate, a second mortgage is just what is said. This means that you now have two mortgages to worry about.

So, while it may mean extra money when you need it most, you should take a look at the long-term effects of obtaining a second mortgage on your home. As with your original missing payments or failure to pay a second mortgage, you could lose your home.

How Does It Work?

Just as you had to pass a selection process when you bought your home first, you will have to go through it everything again when you apply for a second mortgage. If you have good credit and the loan offers good value for both the lender and you, then you should not have a problem. If you have bad credit, then you may have difficulty getting approved, even though you may find companies and lenders specializing in mortgages with bad credit. Check here.

Equity in your home is a key factor in determining if you are approved for a second mortgage or not. If the value of your home has greater than before, then again it will work in your favor. The good news here is that the value of the property has increased steadily over the last 5 years in the UK, so it would have to be extremely unfortunate for your house to be worth no more than the one you bought.

Pros and Cons of a Second Mortgage

In addition to allowing you to access emergency cash funds, a second mortgage loan provides you with a much better interest rate as well than you would find in a more traditional loan. This is just because the interest you pay is a mortgage interest rate, rather than a higher rate through a bank or a loan company. In addition, it is a much cheaper option than using your credit card to help you get out of your dilemma. Of course, there is a drawback.

Summary

The reason why a second mortgage is so cheap compared to normal loans is that it is a guaranteed loan, which means that it is insured on your property. This, in turn, means that you will potentially lose your house once you do not make the payments. Even if you take the second mortgage with a special lender, they can still foreclose your home if you do not make your payments, regardless of whether you are up to date with your normal mortgage. For more details, visit: https://www.steponefinance.co.uk/mortgage-loans/