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Having been in the banking sector for 23 years I have seen many
miss-spellings of mortgage, morgage and mortage being the most
common. A 2nd mortgage on your property can make large purchases such as a house extension or property improvements far more affordable as opposed to a short term loan. Indeed, for many, this would be the only option available to cover the cost of such expense. A
second mortgage could also be used for other items such as short term debt consolidation (repaying all those credit cards) which will alleviate the monthly household budget and reduce the overall interest rate paid.
The 2nd mortgage market is probably one of the most competitive markets around today and as a result, there will be a myriad of lenders anxious for you to borrow from them. As a result of this competition, there are some good deals to be had but, you will need to research thoroughly as the underlying deal may not be all it purports to be.
You should not let the thought of receiving a large amount of cash quite quickly and easily cloud your judgement when seeking a 2nd mortgage. Consider the following pointers and you will be better placed to find the best 2nd mortgage for you.
Costs Associated with a 2nd Mortgage
There will be costs associated with purchasing a 2nd mortgage and you should be aware of this and budget accordingly. Some lenders are happy to let you roll this onto the 2nd mortgage loan and you may not therefore need to find this from your own pocket. Typically, these costs / fees are:
- Assessment fees to appraise your 2nd mortgage.
- A fee to cover the administration costs of your 2nd mortgage application. Please note that such a fee may not be returned to you if your application is denied / declined.
- Security fees. These are to cover the work involved in the legal process of talking a 2nd charge (2nd mortgage) over your property. They will also include ancillary costs incurred such as searching your title to the property. Most lenders will publish a fixed fee to cover this process but, make sure you know what the total costs are upfront.
Other Considerations when Looking for your 2nd Mortgage
- Interest rate or APR (Annual Percentage Rate). Shop around; this market is competitive. Do not accept the first rate you are offered. It is advisable to obtain offers for your 2nd mortgage using at least one of the following:
- Bank
- Credit Union
- Dedicated mortgage lender
- Late payment penalties. Some mortgage lenders will impose penalties if you are late, or indeed miss a monthly payment. These penalties could drastically increase the cost of your 2nd mortgage. Try to seek out a lender who does not have too stringent penalties and better still, none at all.
- Early repayment penalties. Your situation may change, inheritance or re-financing perhaps, and if you wish to repay your 2nd mortgage ahead of the scheduled repayment, a fixed or variable fee may be applied. Ascertain this information upfront.
- Additional insurance. You may be coerced into talking out additional life cover. You may require this but check out your existing policies and their cover first before accepting additional cover for your
second mortgage.
- Balloon repayments. These are 2nd mortgages that have a low repayment level at the outset but there will be an enormous payment due at the end of the term. These can be useful in certain circumstances but do not be clouded by the attractive and affordable repayment at the outset; they will go up.
Before you meet lenders to discuss your
2nd mortgage requirements, spend some time researching on the internet to get a feel for the type of deals and conditions that are currently available; you can start by looking at the resources available on this web site.
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