Are
There Different Kinds Of Second Mortgage?
Most
second mortgages work like first mortgages – you are
provided with a single lump sum payment, which you repay
on a fixed schedule.
However,
a limited number of lenders also offer a different type
of second mortgage, which effectively provides you with
a line of credit.
This
type of second mortgage allows you to gradually withdraw
the money as you need it – at different stages of
a house extension, for example, or maybe to make several
large purchases.
It's
even possible to get a "second mortgage in excess"
– a very high-risk type of secured loan that takes
your loan-to-value ratio above 100% - in other words, the
mortgages you have secured on your home are worth more than
the property itself.
To
be honest, it is probably best to avoid this situation if
you possibly can – and you will need a very good credit
rating to even be considered by lenders.
Most
people don't need loans like these, but if you think that
one of these types of second mortgage may be suitable for
you, a mortgage broker will be able to explain the choices
you have.
Which
Lenders Provide Second Mortgages?
Second
mortgages are available from a variety of lenders –
ranging from specialist loan companies to regular high street
mortgage lenders.
The
terms and conditions on offer – such as fees, interest
rates and repayment schedules – can vary widely, so
it pays to shop around before you decide on a deal.
Things
You Should Know About Second Mortgages
Second
mortgages are considered riskier than first mortgages by
most lenders. Consequently, the terms and conditions are
sometimes a little more restrictive, and the interest rates
are normally higher.
Here
are a few things you should consider before you agree to
a second mortgage:
•
What are the early repayment fees?
•
What would happen if you had to sell your home – could
you pay off the second mortgage, or would you need to re-secure
it on your new home? Either way, what would the fees be?
•
Can you make overpayments, or take payment holidays if you
need to?
•
Would remortgaging be a better option? If you can, you will
probably get a lower interest rate this way
•
Do you need payment protection insurance? If so, make sure
you shop around. You will probably be able to find cheaper
insurance than that offered by your second mortgage lender.
Remember:
Just like your first mortgage, your second mortgage is secured
on your home. If you fail to keep up the payments on a second
mortgage, your house could be repossessed even if you are
not behind with your first mortgage.
Read
On
What
Are Second Mortgages?
Why
Would I Want A Second Mortgage?
How
Do Second Mortgages Work?
Are
There Different Kinds Of Second Mortgage?
Which
Lenders Provide Second Mortgages?
Things
You Should Know About Second Mortgages
Second
Mortgages: Frequently Asked Questions
Second
Mortgages - UK Guide
