2nd mortgage


Getting a good deal for 2nd mortgage is easier in one sense and difficult in another sense. As they say Been there, done that makes it easier the second time round; so 2nd mortgage is easier because you now know much more about mortgages than you knew at the time of your first mortgage. However, that is easier said than done for you need to evaluate a lot of things before you actually go for that 2nd mortgage. Most of the advice that is applicable for first mortgage is also applicable for 2nd mortgage. This includes things like analyzing your needs, choosing a reputable mortgage broker/lender, analyzing various mortgage options before actually choosing one, going for a pre-qualification etc. However, there are other things too that you need to consider for 2nd mortgage.

The first thing to consider for 2nd mortgage is the reason behind you going for the second mortgage. There are basically 2 reasons that are cited by most people going for 2nd mortgage. The first reason is insufficiency of current house. This could be just because you dont like your current house any more or it could be just because of expansion in your family e.g. due to you getting married or due to addition of a kid to your family or because of you planning to live-in with a girlfriend or boyfriend etc. So, you need a new house and hence wish to go for 2nd mortgage. The second most-common reason for going for a 2nd mortgage is investment i.e. building up home-equity with another house (and a 2nd mortgage). As such, buying a second house (using a 2nd mortgage or otherwise) is one of the preferred routes for channeling money for investment purposes. So those are the two most common reasons for going for 2nd mortgage.

What do you do when the thought of going for 2nd mortgage first hits you?

Well, you simply evaluate whether 2nd mortgage is a good option for you and whether you will be able to handle that debt (2nd mortgage) or not. The first bit is to see if you really need to go for a 2nd mortgage. You will need to analyze this in the light of your reason for going for 2nd mortgage. So, if you are planning to get 2nd mortgage because the current house is not good enough, you might as well explore if any modifications or a little bit of construction will help make it better and eliminate the need for 2nd mortgage. If the reason is investment, check other possible avenues before you go forward with the 2nd mortgage. The other thing to check is your current debt and other expenses, i.e. your current monthly outgo. Check how much your outgo will be after 2nd mortgage and whether your current earnings/pay is sufficient to handle that. If you plan to sell your current house, you might factor-in the cost of your house in your mortgage calculations.

So evaluate all the options and check the feasibility before you actually enter into 2nd mortgage.