Bad Credit Second Mortgage Loan

Bad Credit Second Mortgage Loan

A bad credit second mortgage loan is a loan in which the home equity serves as the collateral. A bad credit second mortgage loan is similar to replacing your first bad credit home equity loan with a new mortgage.

Bad credit second mortgage loan is secured by the home equity which makes the lenders comfortable to approve a second loan. So even if the bad credit borrower fails to repay on time, the lender may foreclose on the property. As a result, procuring a second mortgage loan is a lot easier and ideal. In fact, a second mortgage can help the borrower improve his credit score.

There is scope for consolidation of the debt, once the funds are received and the borrower can pay off in a single monthly payment. Notwithstanding the fact that the borrower should have an eye on his financial situations in order to ensure if he can afford an additional monthly expense.

The homeowners should see that they have sufficient equity in their homes, before applying for a second mortgage loan. Even if second mortgages carry a higher interest rate, these loans help you to acquire funds for home improvement, children’s higher education, big purchases, debt consolidation, etc.

Homeowners are encouraged to contact several lenders, to be approved for a second mortgage. It is always better to work with a mortgage broker because they provide many offers. Moreover, they will be able to locate the best possible deals by negotiating with various lenders.

The applicants can select the best offer suited to them after the comparative shopping. Then the applicant is required to submit an application to the lender. They may also contact their current mortgage lenders who may agree to work with you only if you have a good payment history in spite of having a bad credit.

The following have to be kept in mind before applying for a second mortgage.

1. Do comparative shopping by contacting several lenders, banks, credit unions about the rates of the second mortgage.

2. When you miss a payment or if u have a late payment, default penalties may be applied to your account. If you approach for a second mortgage with these records, you are sure to stand a chance of getting a very high interest on your second mortgage.

3. Don’t ever apply for second mortgage bundled with voluntary insurance. This is because even if this coverage may be useful, it need not be bundled in with the second mortgage

4. See if there are any balloon payments in the deal. Balloon payments are those easily affordable payments at the cost of very high payments towards the end, pinned up with the second mortgage. Always read the contract very carefully before jumping into such eye catching stuff which is a pitfall in disguise.


5. Before applying for a second mortgage, one must prepare a budget. In addition to the monthly payment, there will be other charges like appraisal fees for the second mortgage, application costs for the second mortgage, which are not refundable even if you decline, and other closing costs for the title search and processing.

6. Always go for a reputable and trustworthy lender for second mortgages who is ready to disclose all the hidden costs, so that you get what you pay for.
Second mortgages can be put to use in a number of ways like home improvements, debt consolidation programs, to avoid private mortgage insurance, to purchase additional homes, to create a home equity line of credits, etc.

Opting for a second mortgage loan may help borrowers reduce their monthly payments. Second mortgage offers a low interest rate which helps people to start with their new mortgage by saving money. The extra money may be used to pay off other debts like credit cards or school bills.

Usually people take on a second mortgage whenever they are having extreme financial burdens. This loan is sure to relieve some of the burden, but it also means that the borrower is paying for his home for a lengthy term. Even if it allows the borrowers to pay off some of their debts, it does not grant them full freedom from debts as the mortgage term is quite long.

When taking a second mortgage, it is better to opt for a lengthy fixed rate mortgage loans if the borrower is looking for small monthly payments. Probably a 30 year term.

Those people who can afford higher monthly payments, or probably would have taken the current loan for purchasing a second property, may better opt for a short-term mortgage loan of 15 year term which can be of a great benefit to them and will end up paying less in the overall interest and they will get over the mortgage in relatively lesser time.