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Understanding Home Mortgage
Understanding Second Home Mortgage - Terms And
Limitations by Yvonne S.
If you're thinking of getting a second home mortgage, you've come to
the right place. Read this article to understand all the terms and
limitations that can be imposed on a second mortgage. It's a big
financial undertaking to get into a second home mortgage and there
are many costs, fees and rates that you need to be aware of. The
whole process must be taken seriously.
Also, please understand that there is a risk that you could lose
your home if you default on your second mortgage. Many people do not
believe this but it's a fact. There are people who lost their home
because they defaulted on their second mortgage. So, make sure you
do your due diligence in order to reduce the risk.
Understand all the Terms
Below are some of the many costs, fees and rates involved in a
second mortgage loan. You have to make sure that you understand them
all.
- interest rates
- penalties
- bundled options
- appraisal fees
- application costs
- points
- closing costs
All these items add up and make up of an overall cost of your second
mortgage. They are the first things you need to watch and monitor
closely. Make sure you negotiate with the lender to get the best
deal. Work the deal in your favor by pointing out things like: good
credit score, low or no debt and steady income.
Watch for Hidden Costs
Sometimes costs may not be spelled out clearly. They may be hidden
in the small prints or somewhere within the contract where they
don't stand out. Two main hidden costs you will need to be aware of
are: balloon payments and voluntary insurance.
Balloon payments are common in a mortgage loan. They are a lump sum
payment made either at specific intervals or at the end of a
long-term loan. Usually you get low monthly payments in return for a
balloon payment at the end of the loan. However, you have to make
certain that you can afford this payment otherwise you default on
the loan.
Voluntary insurance is often bundled into the loan. It may be
something you need, but it may also be coverage you already have. It
is voluntary, but usually is included unless you specifically state
you do not want it.
Limitations of a Second Home Mortgage
One last thing you should understand that there is a limitation for
a second mortgage home loan. You can not just borrow whatever amount
you want. There are second mortgages that allow you to borrow up to
125% of your homes equity. However, you will be limited in the
amount you can borrow. Additionally, you can have problems securing
good rates if you have bad credit.
In conclusion, a second mortgage home loan is a good option for
those who have extra cash and good credit scores. Make sure you shop
around and completely understand the contract before closing the
loans.
About the Author
For more information about second home mortgage loans, please visit
our home mortgages website.
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