Getting a Second Mortgage on Your Home

Many times, consumers find themselves in positions where it becomes necessary to apply for a second mortgage on their home. This could be due to their seeing the prospect of falling behind on their mortgage payments and so needing assistance, or that they would like the extra money for other purposes like major purchases requiring a large amount of money. A second mortgage is often called a home equity loan.

When a person purchases a home, it builds up what is called equity. Equity is the monetary value that has accrued on the home through payments. The longer the payments being made on the home, the higher the equity should be.

There are many financial institutions that offer loans for home owners. On Ohio, a brief search in the yellow pages under a phrase like home equity loans cincinnati oh could point a person in the directions of their nearest home equity advisor or bank. A home equity loan is a loan applied for using the person’s home as collateral. If approved for the loan, the person is given a lump sum of money to pay back over an agreed upon period of time at an agreed upon return rate with agreed upon specifications.

The reasons a person would opt for applying for a home equity loan over other types of loans are varied. For one thing, the amount one could borrow might be significantly higher than from other loan sources. The interest on a home equity loan is usually lower, if there are credit statuses that reflect missed payments, etc., there might be a better chance at getting a home equity loan than another type of loan. Some of the interest that one pays on a home loan could be tax deductible, which is another benefit that makes applying for a second mortgage more attractive to a borrower. Home equity loans seem safe for bankers because one is utilizing their home as collateral. Should a person default on the loan, the bank can foreclose on the mortgage and place the home up for resale.

During the lending process, a financial institution would assess the value of the property to be utilized as collateral through having it appraised. The equity in the home will be the deciding factor of the amount of the loan to be given, plus the credit rating of the borrower. The better the credit rating, the higher the loan amount to be received. A person cannot purchase a home with a second mortgage loan, although the loan can be utilized to refinance the home being utilized as collateral for the loan.

When a person sets about looking into the different borrowing options available to them, a home equity loan would be very appealing if they own a home. If not, then the other borrowing options would be more accessible. At either juncture, sometimes it becomes necessary for a person to have the need to borrow money. Things happen, cars break down, etc. One cannot forecast their financial “weather.” One never knows what will go wrong or what will break from one day to the next. It is a viable part of the economy for persons to be able to borrow money at times of need.