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How to get a second mortgage

Tuesday, June 21, 2011 11:03 AM

By Kate Saines

If you are thinking of buying a holiday home, an investment property or simply need some extra cash for a big project then a second mortgage could be the financial solution.

Second mortgages boast certain advantages over re-mortgaging, are cheaper than unsecured loans and in many cases allow borrowers to take out larger sums of money.

But with the mortgage market such a difficult place to enter, are lenders still willing to offer these loans and, if so how do potential 'second mortgage borrowers' fulfil their criteria?

We've tapped into the knowledge of independent financial adviser, Andrew Coles of Beard & Coles, to find out.

What is a second mortgage?

A second mortgage is a loan secured on a property, on to which there is already a first mortgage secured.

The first and second loans are separate and they are paid back independently of each other, they often come from two separate lenders and the borrower will therefore need to make two monthly repayments.

Andrew Coles explained when you take out a second mortgage, the existing mortgage remains the first charge on the property. "If you default on the mortgage, the first mortgage has to be paid first before the second one is paid off," he said.

How do second mortgages differ from remortgages?

Remortgaging involves switching from one lender to another, and usually borrowing additional funds in the process.

As a result, when you remortgage, you'll only have one monthly repayment to make to one lender.

Mr Coles said there were certain advantages second mortgages held over remortgages.

"A remortgage can sometimes offer a lower rate than a second mortgage, although the fees and charges may be higher," he said. "You may also want to avoid moving your main mortgage. For example, you may have an excellent deal on your mortgage or your circumstances may have changed since you took out the loan."

Are there any other advantages?

According to Mr Coles, because a second mortgage is a secured loan, lenders are able to offer a lower rate of interest than a standard non-secured loan.

With many people using second mortgages to fund repairs or improvements to their home, buy a new car, consolidate debts or pay for their wedding, it makes it a great alternative to a personal loan.

Exactly how Mortgages Are Hunted for Nowadays

Mortgage brokers can be an fantastic useful resource for finding the mortgage; if you're able to choose one that won't make the most of an individual. The challenge along with selecting a broker is because they tend to be compensated through payment as well as acquiring a real mortgage broker can be quite a struggle. Allow me to share numerous guidelines to help you locate the moral mortgage broker to your home mortgage loan.

When within a personal crossroad, you might definitely obtain advantages through finding the solutions of an authorized broker who can keep with a person during the entire procedure. A reliable broker provides hassle-free entry to a variety of personal loan selections and helps make the approach uncomplicated and much less nerve-racking.

However, there remain dishonest brokers out there, you've got methods readily available, including the Better Business Bureau, to aid steer you to definitely the bona fide types. You can often use the services of a new mortgage broker totally free to oneself. Find out that could acquire the costs through the lender your going having. When you have a tight schedule, some sort of broker is fine about the item in order to make the exchange since easy in your case as it can be.

A completely independent broker is actually ideal simply because they are certainly not associated with any providers. You'll see a lot of big name corporations boasting they can broker the finest option with your mortgage but actually, they only represent several companies. Because of this after they choose a mortgage on your behalf, they're going to only be looking at the choice of offers made available from a select volume of corporations. If you find yourself speaking with the mortgage broker be sure to question them no matter whether they're linked, multi-tied or independent. These is definitely greatest.

Generate Distribute Fees are your markup of your respective interest rate because of the mortgage broker for their commission. This kind of payment is add-on towards source along with digesting charges that you are already buying their particular providers. This particular markup is totally needless and provides only to improve their own commission rate as well as your cost. When talking along with probable mortgage brokers let them know you know the way Produce Distribute Quality operates and will not pay out the idea on your own fresh mortgage.

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