2nd Mortgage Quick Tips
Getting a Successful 2nd Mortgage 2nd mortgages can be tempting
because you can get a large amount of money. However, there are some
common pitfalls you should keep an eye out for. Take a quick glance
over these 2nd mortgage quick-tips. You’ll be in a better position
to negotiate the best 2nd mortgage.
2nd Mortgage Quick-Tips
Watching these factors will
help your 2nd mortgage be a success:
- The APR.
Don’t take the first 2nd mortgage rate you see. Contact at least one
bank, one credit union, and one dedicated mortgage lender about your
2nd mortgage.
- Try to avoid 2nd
mortgages with default penalties 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 expensive. The interest rate on your 2nd mortgage could
increase dramatically.
- If things change,
you don’t want to pay a hefty prepayment fee to get your 2nd
mortgage off the books.
- Flexibility is important,
so avoid locking yourself in.
- Beware of 2nd 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 2nd mortgage. Furthermore, you may already have adequate coverage
outside of the mortgage.
- Know about any
balloon payments in the deal. Some 2nd 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 2nd mortgage
is so attractive.
2nd Mortgage Costs
Now, before you apply for a
2nd 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
2nd mortgage processed.
- Appraisal fees
for your 2nd mortgage
- Points
- Application costs
for the 2nd mortgage, which may not be refundable if you’re declined!
- Other closing
costs. For example, they may do a title search for your 2nd
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 2nd 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.
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