Second Mortgage Calculator

A second mortgage is an additional mortgage loan that you may be able to take on by using your home and its grown equity as the collateral. Any lender (private or traditional) are a bit leery of approving second mortgages for the sole fact that the first mortgage loan takes first place for repayment if the homeowner defaults on the original mortgage. A second mortgage is considered when there is equity built up in the home, in other words, if there is enough equity available, a lender may offer a HELOC (Home Equity Line of Credit) or a second mortgage loan.

Homeowners often use a second mortgage to alleviate small debts, perform repairs or renovations to the home or execute some home décor improvements. On a second mortgage, the home & property are the collateral against the secondary loan (this kind of loan usually comes with a lower interest rate attached to it). Another option for homeowners when taking out a second mortgage is the opportunity to make ‘interest only’ payments, which keeps the monthly payment amount lower (this is especially enticing to owners that are nearing renewal or performing renovations for a future resell).

The longer you make your monthly payments on your first mortgage, the more equity you will grow in the home, which equals a small side investment that you can borrow a percentage of. No lender is going to loan you precisely the dollar-for-dollar amount of your equity, but if you have grown equity over a period of years, then your borrowable equity percentage will be higher. You may be wondering what you can use the second mortgage money for…the rule of thumb is for ANYTHING. You can follow through with a debt consolidation, pay for furthering education, purchase a vehicle, use it as a down payment on another home/property, or just about any other purpose.

When you have equity in your home, you have access to funds that normally would not be there, so consider your equity a purposeful side investment that you can draw on with the right lender. You do not have to stick with your first mortgage lender, for you can easily shop around to see which lender will offer you the best interest rate, although second mortgage loans tend to have a higher interest rate because the lender is taking more risk.

Let’s look at the facts that swirl around all types of mortgages. You are doing your research and due diligence to see if you qualify for a mortgage with lenders that differ in their mortgage offerings. You may have already discovered that there is a very long list of mortgage types, the various tools that you can use privately to help you gain a deeper perspective of the mortgage market, and different types of lenders. A first mortgage is the harder one to gain pre-approval for, whereas a second mortgage is easier but costs more, even though you are borrowing against your own equity. The top three mortgage types are an adjustable rate mortgage, a fixed rate mortgage, and a variable rate mortgage, each offering pros and cons.

There are major banks & credit unions that work with mortgage products, but there are also private mortgage lenders like mortgage companies. Traditional banking institutions have stricter criteria, but lower interest rates and private lenders are more lenient with criteria but impose higher interest rates and shorter terms. With the juggling act of carrying a first and second mortgage, you should be confident that you can afford to take on that much debt each month (any default in payments will result in the lender(s) of both mortgages taking the home from you and settling up the balance of the mortgages through a resale of the home).