Having a second mortgage on a home means receiving an amount of money to mortgage a property that already has a first mortgage on it that may not have been paid off yet. This is an option that many homeowners choose when they need to access credit , either to make renovations to this home or to meet some other investment or expense. The mortgaged property acts as collateral for the payment of said loan.
Do you know what a second mortgage on a home is?
As we have said, it is about requesting an amount of money by putting up as collateral a property that is already listed as security for a first mortgage. In no case are we talking about refinancing, because the first mortgage will not be cancelled and a new one will be opened with a single amount, nor about novation, since we will not replace the first obligation to increase its amount or modify its conditions.
How much money can I request with a second mortgage on a home?
As a general rule, a second mortgage on the same property requires a percentage lower than the appraisal value. While in the first mortgage the amount can reach up to 80% of the appraisal, in the second mortgages this figure is around 50%.
Why apply for a second mortgage instead of a personal loan?
Mortgages usually offer a better interest rate than personal loans. However, with a mortgage loan the repayment terms are usually longer than with a personal loan, so it is advisable to compare the amount of interest you would have to pay in both cases to choose the option that best suits your needs and obligations.
Do they have the same conditions as the first mortgage?
Normally not. Second mortgages usually have different conditions than first mortgages, since higher interest rates are usually imposed. In addition, financial institutions usually require the debt to be settled within a shorter period of time.
