Second Mortgage Tips and Tricks

Second mortgages can be enticing because you can get a large sum of money. However, there are some common bank tricks you should be aware of. Take a quick look over these second mortgage quick-tips. You will be in a better position to negotiate the best second mortgage.

Watching these hidden items and factors will help your second mortgage:

• The APR. Don’t take the rate you see. Contact at least one bank, one credit union, and one dedicated mortgage lender about your Second mortgage.
• Try to avoid default penalties.  These are applied when you miss a payment or are late. We all think it won’t happen to us, but a clerical error can become very costly. The interest rate on your second mortgage could increase dramatically.
• If things change, you don’t want to pay a hefty prepayment penalty to get your second mortgage off the books. Flexibility is important, so avoid locking yourself in.
• Beware of second mortgages that are bundled in with voluntary insurance policies. While this coverage may be useful, you may or may not need it bundled into your second mortgage. Furthermore, you may already have adequate coverage outside of the mortgage.
• Know about any balloon payments in the deal. Some second mortgages start with low, easy-to-afford payments (at the cost of a huge payment at the end). Read the contract carefully to see if this is why a particular second mortgage is so attractive. 

Now, before you apply for a second mortgage, prepare for and budget for the costs. In addition to committing to a monthly payment, you might have some up-front costs to get your second mortgage processed.

• Appraisal fees for your second mortgage
• Points
• Application costs for the Second mortgage, which may not be refundable if you’re declined!
• Other closing costs. For example, they may do a title search for your second mortgage, along with other processes. Just ask for a printed list of these miscellaneous fees. 

As with anything, sometimes you get what you pay for. I recommend using a reputable lender that you can trust for your Second mortgage, and one who will simply disclose all the costs. If you find a deal that sounds too good to be true, you’re probably missing something in the fine print.

Related posts:

1. All About Mortgage Refinancing
2. Choosing the Right Mortgage Broker, Mortgage, and Mortgage Insurance
3. The Benefits of Mortgage Refinancing