Are you in need of a loan and have faced rejection from the banks and other lenders due to a low or bad credit score? Second mortgages can be an excellent option if you need the loan to help you through a crisis. You will be making some evident improvement to your credit rating by using second mortgage to consolidate your debts, and eliminating your credit card and other consumer debts.
With a credit score below 650, you may face trouble getting a loan from the bank. Cleaning up your credit report by making significant improvement with the help of second mortgage is thus your best resort. It can be seen as a stepping stone process, where you use a second mortgage to consolidate your debts and then continue to rebuild your credit to refinance the first and second mortgage into a lower rate first mortgage with a bank or other institutional lender.
It may be difficult to find a lender for second mortgage bad credit loan thus you must receive professional advice and service from an experienced mortgage broker. Not only will they find the best rate for you but also figure out the best lending terms and refinancing plan to bail you out of the second mortgage soon.
A bank puts far more emphasis on your credit score that second mortgage lenders. However, they may require that the second mortgage proceeds are used to payoff the high rate debt and may also want to be sure of how you’d service the loan.
Wondering how does second mortgage work? It is concerned with equity in your home as the loan size will be based on that. The lender will lend a maximum of 85% of the total value with the first mortgage included. You will need to fill an application to start the process and approximate the value of the home. Next is to review your credit report and order an appraisal on the home if the mortgage broker feels you can qualify for the second mortgage. With the appraisal completed, the second mortgage lender will issue a mortgage commitment stating the terms of the loan, which the mortgage broker must help you understand. Once either party agrees with the conditions, the agreement is sent to the lawyer to finalize the transaction as would have happened with the first mortgage.
Can you refinance a second mortgage?
It is critical to refinance your second mortgage once your credit is better as second mortgages are for a limited term of one or two years. You must use the funds properly to combine the two mortgage loans into a new low rate first mortgage instead of renewing your second mortgage. You must also calculate any costs or penalties of breaking any current mortgage terms. While there may be legal and other additional costs besides the penalties and the lost of the new appraisal, however, to combine the two mortgages into one is often the best option as second mortgages often come at a high rate.