by Laura Kingsbury
A second mortgage can sometimes help your financial situation.
Second mortgages, though often hard to come by, offer borrowers an additional option to pay off life expenses. In most cases, you would be able to apply for a second mortgage right after taking possession at closing. While criteria varies among lenders, the timeline depends on your home equity and personal qualifying factors.
What Exactly is a Second Mortgage?
In order to receive a second mortgage, the borrower typically applies for a home equity loan. Before lending additional money, banks figure out how much equity you have in the home, comparing how much the home is worth to how much you owe. If you owe $300,000 on a home worth $400,000 in the current market, you have $100,000 worth of equity. This
equity can be used in the form of a second mortgage to pay off other life expenses such as unexpected medical bills, a second home, or just general debt consolidation. The time it takes for you to build enough home equity to be attractive to various lending institutions determines how long it will be until you can take out a second mortgage.
Additional Qualifying Factors
Besides home equity, lenders look at other factors to determine your eligibility for a second mortgage. These factors include your credit score, your employment history and your assets, along with the ratio of how much money you owe versus how much money you make. Establishing a strong work history, improving your credit score and paying off other debts would directly affect your personal timeline in applying for a second mortgage.
Other Factors to Consider