Considering a Second Mortgage Home Loan?
Looking to fix up your home a bit, pay off a student loan or consolidate your debts? You might not realise it, but the equity in your current home is accessible through avenues like second mortgage home loans. If you’re looking for a way to borrow more money against the equity in your home, a second mortgage might be the answer – it’s basically two separate mortgages on one property.
How does a second mortgage work?
In simple terms, a second mortgage is a loan that uses your home as security. The amount you can borrow will depend on the value of your property, and how much equity you currently have in it. So if your property is worth $500,000 and you have a $250,000 mortgage, you have $250,000 in equity available to use as security on your second mortgage home loan.
Second mortgages are typically taken out for smaller amounts than the first mortgage on a property, because they come with higher interest rates and fees than first mortgages. The reason for this is that second mortgages are considered to be riskier for lenders – if you can’t keep up with the repayments on your second mortgage, the lender may not be able to recover their money by selling your property.
What are the benefits of taking out a second mortgage loan?
- If you’re borrowing less than 20% of the value of your property, you won’t have to pay any Lenders Mortgage Insurance (LMI).
- Your second mortgage loan can be used for a range of purposes. For instance, you might want to use the money from your second mortgage to make home improvements, buy an investment property or pay for education costs.
- This fast release of funds allows you to access time-sensitive investment opportunities.
Is a second mortgage loan the right choice for your specific circumstances?
Taking out a second mortgage on your home is not something that should be done lightly. If you’re thinking about taking out a second mortgage, there are a few things you need to consider first.
- One of the most important things to think about is whether you’ll be able to afford the repayments. Remember, second mortgages come with higher interest rates than first mortgages, so you’ll need to make sure that the repayments fit comfortably within your budget.
- You should also think about how long you’ll need the loan for. Second mortgages typically have shorter loan terms than first mortgages, so you won’t have as much time to repay the loan.
- Finally, you need to make sure that you’re comfortable with the idea of using your home as security for the loan. If you can’t keep up with the repayments on your second mortgage, the lender may be able to sell your home to recover the money they’ve lent you.
Speak to BFG Loans for tailored advice from experienced brokers
At BFG Loans, we’ll work closely alongside you to evaluate your current circumstances and goals for the future, so that we can find the ideal lender and loan product for your individual needs. Whether a second mortgage loan is the way to go or you’d be better off refinancing your existing home loan, for example, we’ll help you navigate the lending process so that you find the right lender with the best possible product and rates for you.