A second mortgage is a lien levied against a property that has a loan. In specific circumstances a lien is a right to own and take land.
In other words, if you default on your loan your lender has the right to take control of your home. When you take out a second mortgage, a lien will be drawn out against the portion of your home you paid off.
Unlike other types of loans, such as auto loans or student loans, you can use almost anything of the money from your second mortgage. Such loans also provide much lower interest rates than credit cards. This makes them an enticing option to pay off debt by credit card.
What is home equity?
You don’t legally own your entire house until you’ve taken out the mortgage. You own a part which is equal to the price you pay. Home equity is the part of your house which really is yours. Calculation is pretty simple: just subtract your mortgage balance from your home’s market value.
What’s required to get a second mortgage?
Equity. And lots of it. Second mortgages are dangerous to borrowers as the owner on your first mortgage has dibs on your property if your home is foreclosed. So the lenders want to know three things when it comes to issuing such loans. That you have good credit, you have equity, and you don’t have a lot of debt.
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