Homeowners, who have a good amount of equity on their property, maybe considering applying for the second mortgage to help with their child’s educational fund or because they want to tackle some home renovations. Before you apply for one, you should check if you can get funds from other sources such as a member of your family or borrowing from a bank at a lower interest rate just to name a few.
However, if you believe that a second mortgage is your best option, you will need to do more research on the terms and conditions of the mortgage including the interest rate and even ask a few questions, especially when you are dealing with a mortgage broker. Here are a few that you should consider:
- What are the broker fees? The number of broker fees varies depending on how much money you will be borrowing and the amount of time that the broker will spend handling your mortgage application. If your second mortgage is worth $20,000, the broker fee can range from $2,000 to $3,000.
- Do you need a lawyer? Hiring a lawyer when applying for a second mortgage can help you reach a good deal. If the mortgage broker recommends that you don’t need one, it is best to talk to someone else. Although this will mean additional expense, your best interest is taken care of by the lawyer.
- Is an appraisal necessary? Most lenders will require an appraisal but there are those who want to inspect the property on their own. The appraisal is usually for the lender’s benefit. If it is not needed by your lender then you won’t be spending anything. On the other hand, if you want to learn about the current value of your property, hiring someone to appraise your property will be needed.
- Can you pay off the mortgage without any penalties? Mortgage lenders often have a three-month penalty on early or late payments. If you want to avoid penalties, make sure that you pay your dues on the renewal date itself.
As the borrower, it is important that you educate yourself on second mortgages including how strict the lender is when it comes to implementing its rules. There are some who will start the foreclosure process as soon as possible, while others are willing to give their borrowers some leeway with their payments.
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