Securing A 2nd Mortgage
While second mortgages may not be nearly as easy to get as a regular loan, it is good to be aware that you can find a bad credit second mortgage if you happen to need one. The reason this is possible is that those lenders who make these types of mortgages have financial portfolios that make it easier for them to absorb more risk than more traditional lenders. Of course, this comes at the price of higher fees and interest rates, but at least you can the option.
A 2nd mortgage is a secured loan that you take out against your home. However, if a foreclosure should happen, any proceeds will be put toward the first mortgage before any of it goes toward the second mortgage. In theory, the only way you could fully pay off a second mortgage is by selling your home for twice as much as it’s worth, and that’s why they are so risky.
Generally speaking, the people who need to take out a 2nd mortgage on their home are the ones who couldn’t make the first mortgage work; meaning they tend to already have shaky credit. This is one of the reasons why a bad credit second mortgage can be more tricky to find. However, there are some things lenders will look for:
1. Equity. The more equity you have in your property, the better. It’s possible to get a 2nd mortgage if you have a 80% or less first mortgage than the current value of your house.
2. Debt ratio. Different mortgage lenders have very different rules, but the lower your overall debt is when compared to your annual income, the more likely it is you will be able to get your loan.
3. Employment history. Mortgage lenders will feel more secure in giving you a second mortgage if they are convinced that you will be able to repay the mortgage.
There are several reasons for a second mortgage. For example, if you are unable to come up with the typical 20% down on your new home, you may be able to use the loan to pay for the difference. However, these types of loans are most often used as a way to get money for other purposes. Sometimes the money may go for home renovations, but they can also be used to buy other things the home owner wants.
Another thing to think about is that you can borrow more than the appraised value of your home. This is getting harder to do in today’s economy, but in some cases you can get a loan that’s equal to 125% of your home’s value. It will be easier to get that amount if your property is likely to increase in value, for whatever reason.
If you are having a difficult time finding a mortgage agent in Mississauga to give you a bad credit second mortgage, then going online is a good idea. Not only will you be able to find all kinds of mortgage lenders willing to work with you, you will also be able to compare their terms and rates before deciding which one you want to get a second mortgage from.
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